Obama Already Butting Heads With Fellow Dems

Pre-inauguration test of next president comes from his own party

Tested before taking power, President-elect Barack Obama privately delivered a pre-inauguration veto threat to fellow Democrats on Tuesday, saying they would not deny him use of the remaining $350 billion in federal bailout funds.

Obama coupled his threat with a promise to revise elements of the original bailout program that have drawn widespread criticism, pledging that billions will go toward helping homeowners facing foreclosure. Several Democrats said his commitments, to be made in writing, would be enough to prevent an embarrassing pre-inauguration drubbing for the president-elect when the Senate votes this week.

"This will be the first vote that President-elect Obama is asking us for. I'll be shocked and I'll be really disappointed if he doesn't get it," said Sen. Joseph Lieberman, an independent Democrat from Connecticut.

"This is a new beginning."

Behind closed doors, Obama also urged lawmakers to act quickly on the massive economic stimulus measure that his aides have been negotiating with congressional officials. The legislation will blend federal spending with tax cuts, and could reach $1 trillion in size, a measure of the nation's economic woes.

Several Democratic officials described a bill very much in flux. They said lawmakers were discussing allocating as much as $80 billion over two years to help shield schools from the impact of state budget cuts and roughly $40 billion for traditional anti-recession transportation programs such as highway and bridge construction.

Additionally, they added that there was money tentatively set aside to fund a $25-a-week increase in unemployment benefits as well as a 15 percent boost in food stamp benefits. There was support in the Senate for funds to upgrade military barracks, as well. The officials spoke on condition of anonymity, saying they were not authorized to disclose details.

Democratic leaders in the House and Senate hope to have the legislation ready for Obama's signature by mid-February, and House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, D-Nev., held a late-afternoon meeting on it.

"We've made great progress, and we fully intend to meet our deadline," Pelosi, D-Calif., told reporters. She disclosed no details.

For Obama, attendance at the Democrats' weekly closed-door lunch was a homecoming of sorts, a return to the Capitol where he arrived as a newly elected senator only four years ago.

Reid called it a "lovefest," and said the president-elect was greeted with a five-minute ovation by Democrats happy to have the White House back after eight years of Republican rule.

Sen. Carl Levin said the session had a sentimental tone at times, despite the magnitude of the nation's economic woes and the challenge Obama and fellow Democrats confront.

"It's kind of hard not to call him, 'Barack.' So he said, 'Call me Barack for the next couple of days,'" Levin said with a smile.

Separately, Obama's nominee as budget director, Peter Orszag, said at his confirmation hearing that even after the economy recovers, annual deficits could reach $750 billion or so and steadily exceed $1 trillion by the end of the next decade. The president-elect has pledged to make deficit-reduction a priority, but says economic recovery must come first.

Despite its size, the economic stimulus bill is not expected to face heavy opposition among Democrats, and Obama has won praise from Republicans for showing a willingness to show deference to their concerns. Senate Republican leader Mitch McConnell, R-Ky., floated a new proposal, raising the possibility of a two-year elimination of Social Security payroll taxes.

Obama got a boost during the day from Federal Reserve Chairman Ben Bernanke, who said in a speech in London that the emerging legislation could provide a "significant boost" to the sinking economy.

Bernanke also warned in remarks prepared for the London School of Economics that a recovery wouldn't last unless other steps were taken to stabilize the shaky financial system.

There was plenty of controversy surrounding Obama's decision to tap the $350 billion remaining from the financial bailout program that Congress created last fall, when the nation's credit markets ceased working and plunged an already weak economy into a tailspin.

President George W. Bush, acting at Obama's request, formally notified Congress on Monday that Treasury wanted to use the funds, but Congress can vote to block the move.

"It is clear that the financial system, although improved from where it was in September, is still fragile," the president-elect said Monday, making the case for use of the funds.

There was an element of political theater to the day's events. It is a foregone conclusion that Obama will be able to make use of the money as he tries to improve the economy. He could veto anti-bailout legislation if it came to that, and there are more than enough votes to uphold him.

"He said if for some reason it passed, he would veto it," Lieberman said.

But neither the president-elect nor fellow Democrats are eager to see that unfold, fearing it could damage Obama politically even before he takes the oath of office as the 44th president next Tuesday. "I don't think that's the way you start out a presidency," said Sen. Jay Rockefeller, D-W.Va.

Several Democrats said they found Obama persuasive, but added that they would wait to see his formal commitments.

"I feel much better," said Sen. Claire McCaskill, D-Mo., noting the president-elect's commitment to rectify several elements of the existing program.

Levin said Obama promised his administration would do a better job of accounting for how the money was disbursed, would make sure none of it went to pay for stockholder dividends, would enforce restrictions on the pay of corporate executives and more. He also said the president-elect had pledged to honor the commitments the Bush administration had made to prop up the beleaguered domestic auto industry.

It is not clear how much of the money will go toward helping hard-pressed homeowners, but in the House, Democrats were drafting legislation that would dedicate a minimum of $40 billion to that effort.

"If we do not get the second $350 billion, I do not see any way that we can get substantial foreclosure relief," said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. The housing measure is tentatively scheduled to come to a vote in the House on Thursday.

Rep. Spencer Bachus of Alabama, the committee's ranking Republican, questioned whether the money was necessary. The fund is becoming "a grab-bag where people can just reach in and get taxpayer money," he said.

Copyright AP - Associated Press
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