The massive stimulus package which President George W Bush has been promoting to give a boost to the damaged US economy seemed doomed last night, after Senate Majority Leader Mr Tom Daschle proclaimed "dead on arrival" a final Republican version of the package passed by the House of Representatives.
Squabbling over the proposed stimulus package had gone on for so long on Capitol Hill that its apparent failure did not rock Wall Street as badly yesterday as some analysts had predicted, and indeed the debacle raised questions on whether the economy really needed such a stimulus.
The loading of the Bill with retrospective tax breaks which would mean seven-figure cheques for many big corporate backers of the President seems to have been its undoing, with Democrats saying this amounted to cronyism, and would drive up the federal deficit.
In the early hours of the morning, the Republican-dominated House of Representatives passed by 224 votes to 193 a $218 billion (€242 billion) version of the stimulus bill which was almost guaranteed to fall in the Senate.
President Bush mistakenly declared on Wednesday that a deal had already been done by Congressional leaders, but before dawn yesterday he apparently sensed the first major defeat for his domestic policies. He issued a statement shortly after the vote, saying "For the sake of America's workers, I call on the Senate to act now on this plan, which can pass the Senate with a bipartisan majority if it is brought up for a vote. If this bipartisan bill gets to my desk I will sign it."
But by yesterday afternoon, Mr Bush seemed resigned to defeat after a last-minute telephone call from the US Treasury Secretary to Mr Daschle failed to persuade the Senate leader to back the Republican bill.
"We thought we made pretty good progress yesterday," Mr Bush said later. "Unfortunately, that particular piece of legislation was declared dead before it even got to the Senate floor, even though I'm confident if it was ever voted on it would pass."
Under the Republican House bill, big US corporations would get $13 billion in relief over 10 years from the alternative minimum tax that they had already paid. Businesses could write off 30 per cent of new investment in each of the next three years, and small firms would get other investment benefits.
Unemployment benefits would be extended by 13 weeks for those laid off since March, and a 60 per cent tax credit would be extended to unemployed people to help pay for health insurance.
People who did not qualify for a tax rebate would get a check of up to $600. Also, the 27 per cent income tax rate would drop to 25 per cent on January 1st, four years ahead of schedule.
Republicans argued that the stimulus package they presented would help the unemployed and encourage investment to jump-start the economy and create more jobs.
Mr Daschle said: "We've looked at the compromise one last time and concluded that it's wrong on all counts."
The Bill needed the support of 60 per cent of the 100-member Senate, in which the Democrats have a single-vote majority.
