The $800B stimulus bill; Some questions & answers

It seemed like a nice and simple idea at first.

The American economy is bleeding hundreds of thousands of jobs every month in the worst slowdown in a generation - so Washington would try to pass a big-dollar stimulus program to widen the safety net while creating millions of jobs by rebuilding the nation's infrastructure and by attacking other social problems.

But you see there's just one thing: Washington never, ever does anything nice and simple.

And so now Congress is likely to enact some of kind of hybrid program that is a mixed marriage of the original government spending concept with the tax-cutting ghost of Ronald Reagan, and neither liberals nor conservatives are happy. What the heck just happened, what's next, and what does this tell us about the launch of Barack Obama's presidency? The Daily News tries to give you some questions and answers.

Where's the stimulus package now?

The $838 billion jobs and spending bill, a version of which already passed in the House with support from most Democrats and zero Republicans, appears to be hours from approval in the Senate. A measure to end debate and require a vote on the bill, which needs 60 votes under Senate rules, passed last night, 61-36, with support from three centrist Republicans including Arlen Specter, R-Pa.

Will that be the end of the issue, then?

No. The House and the Senate will have to reconcile the major differences between the bills before the final product goes to Obama, who has indicated that he'd like to sign it by Monday.

What are the differences?

The House bill offers more benefits to the poor - an extra $3.5 billion for food stamps, for example, and more money for home-heating assistance - and contains more for educational programs such as building schools and $900 million more for Head Start.

The Senate version relies much more heavily on tax breaks, including $11 billion to make car loans and related costs tax-deductible, a $35 billion plan for tax credits for homebuyers, and $70 billion to reduce the number of taxpayers who will be hit with an alternative-minimum tax.

Which makes more sense?

Depends on whom you ask, of course. If you talk with right-wing talk-radio hosts and a generation of Republican leaders who've memorized the Reagan playbook, the only way to cure a sick economy is through tax cuts, by putting money in the pockets of consumers and getting big government out of the way. But if you ask top economists like Nobel laureates Joseph Stiglitz or Paul Krugman, government spending is by far the best way to jump-start an economy. Philadelphia-area economist Mark Zandi - who advised Republican John McCain in the 2008 campaign - said recently that a stimulus plan boosts the economy by $1.32 for every dollar spent, while the comparable figure for permanent tax cuts is in the range of 30 to 48 cents.

Wrote Krugman yesterday in the New York Times: "All in all, more than $80 billion was cut from the plan, with the great bulk of those cuts falling on precisely the measures that would do the most to reduce the depth and pain of this slump."

Isn't the current stimulus plan really unpopular?

No. According to a Gallup Poll released yesterday, 67 percent of the American people back the president's stance on the stimulus plan; 25 percent oppose it. In contrast, 58 percent disapproved of the way congressional Republicans have handled the issue.

How has Obama handled this situation politically?

Some Washington watchers wonder if he erred in placing so much emphasis on bipartisanship and in negotiating a deal inside of the Beltway, as opposed to pitching the plan directly to the American voters who elected him decisively last November. Obama answered those criticisms to some degree yesterday by traveling to Elkhart, Ind., the home of America's battered RV industry, and with a prime-time news conference in which he sought to pitch the program as common sense.

"Tax cuts alone cannot solve all our economic problems - especially tax cuts that are targeted to the wealthiest few Americans," Obama said last night in his opening remarks.

What's next?

Ha! The economic stimulus is the easy part - as soon as today the Obama administration is expected to unveil the second half of the highly complicated program to bail out America's banking industry, whose bad bets on mortgage-backed securities triggered the crisis. According to news reports last night, the latest version of the plan aims to buy up these so-called toxic assets from the banks that are still stuck holding them, perhaps with help from private investors and not exceeding the $350 billion left in the bailout coffers.

What worries economists is that the scope of the bank's bad debt may be much, much greater than the money that's left to tackle it. *