Bush, Congress Find Economy Is Pushing Them Toward Compromise

Jan. 15 -- President George W. Bush and Congress return to Washington this week to face the prospect of recession and rising home-mortgage foreclosures that may push them toward compromise.

House Speaker Nancy Pelosi of California and Senate Majority leader Harry Reid of Nevada have pledged to work with Bush on a stimulus package aimed at buttressing consumer confidence and avoiding a recession.

``We want to work with the president in a bipartisan way to develop a fiscal stimulus package'' that is ``timely, targeted, and temporary,'' Pelosi said in a statement yesterday after meeting with Federal Reserve Chairman Ben S. Bernanke. A Democratic aide, speaking on the condition of anonymity, said Bernanke agreed some economic stimulus is needed, though the Fed chairman didn't provide specifics. Fed spokeswoman Michelle Smith declined to comment.

Congress ended 2007 mired in gridlock over issues such as the Iraq war and immigration, and the partisan wrangling may continue, if not worsen, this year as both parties seek to score political points before the November elections. The threat of a recession, however, may force the two sides to at least look for common ground on the economy, said Alec Phillips, a Washington analyst with Goldman Sachs Group Inc.

An agreement is ``a maybe at this point,'' Phillips said.

Democrats and Bush have said there is a vital need to energize an economy in which home sales fell to the lowest in 12 years and unemployment is at a two-year high of 5 percent in December.

Swift Action

Treasury Secretary Henry Paulson said last week that the U.S. economy slowed ``rather materially'' at the end of last year, and any stimulus package should be put into effect swiftly.

``We are looking at things that could be done quickly,'' Paulson said Jan. 12 in an interview on Bloomberg Television's ``Political Capital with Al Hunt.''

Paulson's comments were the clearest signs yet that the administration is likely to propose a package of tax cuts and other fiscal measures to spur growth in Bush's State of the Union address on Jan. 28. A government official, who declined to be identified, said the administration is considering tax rebates for low- and middle-income Americans and tax breaks for business investment.

Democrats, meanwhile, are designing a plan that may include a tax rebate of $300 to $500, restoring the $1,000 per child tax credit for low-income families, and spending on infrastructure. House Financial Services Committee Chairman Barney Frank of Massachusetts said in a Bloomberg Television interview yesterday that the package would be about $100 billion.

Bush Meeting

Last week, Pelosi, 67, and Reid, 68, asked to discuss the proposals with Bush, 61, when he returns from the Middle East tomorrow.

With the worsening economy emerging as a leading concern for voters, Democratic presidential candidates have also weighed in. On Jan. 13, Senator Barack Obama of Illinois proposed a $75 billion plan that includes tax cuts and government spending. Two days earlier, New York Senator Hillary Clinton offered a $70 billion program to address the housing crisis and rising energy costs.

The Democrats' demands for additional spending may be a sticking point, said Arizona Republican Senator Jon Kyl. ``There's really almost nothing that would make an impact except tax policy that probably wouldn't pass in a Democratic- controlled Congress,'' said Kyl, 65.

Democrats said Senate Republicans may rely on the same procedural delays they used last year to kill any legislation.

`Filibuster Philosophy'

``It is extremely difficult, as we found this last year, to pass anything if the Republican Senate leadership continues their filibuster philosophy,'' said Senator Richard Durbin, an Illinois Democrat.

Analysts said they expected similar discussions about legislation to address the deepening foreclosure crisis. About 2 million Americans may lose their homes in the next two years, according to the Center for Responsible Lending, a research organization in Durham, North Carolina.

``As those issues become even more sensitive, those bills could move forward,'' Phillips said.

Democrats want to complete legislation that prevents predatory mortgage lending and helps bankrupt borrowers keep their homes. In November, the House approved a bill that would require lenders to ensure borrowers can repay their mortgages and strengthen oversight of mortgage brokers.

`Predatory Bill'

``Given all the mortgage turmoil, the predatory bill is a reasonable possibility,'' said Chuck Marr, a political strategist with Lehman Brothers Holdings Inc., in Washington.

Senate Republicans said new mortgage regulations may cut off the flow of credit to subprime borrowers, those with weak credit or high debt. The White House opposed the measure in November, saying it would increase litigation and reduce future homeownership.

Legislation making more Federal House Administration loans available to subprime borrowers facing foreclosure has the best prospects, Phillips said. Versions of the measure, which Bush supports, were approved by the House and Senate last year. It would make more FHA-insured mortgages available to borrowers by lowering down payment requirements and raising loan limits.

``It seems like there is some sort of a deal that can be managed there,'' Phillips said.