Senate Minority Leader Mitch McConnell of Kentucky discusses the Republican viewpoint on the economic stimulus package.AP PHOTO
WASHINGTON — Senate Republicans circulated a sweeping plan to drive down the cost of mortgages by expanding the federal government’s role in the industry, officials said Monday night as debate opened on an economic stimulus bill at the top of President Barack Obama’s agenda.
The emerging proposal also relies on a bigger and more widely available tax break for homebuyers than is now available, those officials added as Senate Republicans staked their claim to a different type of economic recovery measure than Democrats and the administration favor.
Democrats already are under pressure from moderates in their own party to scale back spending in the $885 billion bill, and Obama met with party leaders at the White House late in the day to discuss strategy.
“What we can’t do is let very modest differences get in the way” of swift enactment of the legislation, Obama said several hours earlier as new layoffs rippled through the economy and the Commerce Department reported an unexpectedly large sixth straight drop in personal spending.
In the Capitol, Republicans said their goal was the change the bill, not to block it. “Nobody that I know of is trying to keep a package from passing,” said Sen. Mitch McConnell of Kentucky, the Republican leader.
“We need to fix housing first,” he said. Republicans are expected to seek a vote on their proposals this week as part of the debate on the overall stimulus measure.
Officials said the GOP was coalescing behind a proposal designed to give banks an incentive to make loans at rates currently estimated at 4 percent to 4.5 percent. Fannie Mae and Freddie Mac, which were seized by the federal government in September, would be required to purchase the mortgages once banks have made them to consumers.
Officials said loans to credit-worthy borrowers on primary residences with a mortgage of up to $625,000 would qualify, including those seeking to refinance their current loans.
Separately, Republican officials said they intended to press for a $15,000 tax credit for homebuyers through the end of the year. Current law permits a $7,500 tax break and limits it to first-time homebuyers.
Republicans generally dislike government intervention in the workings of the private marketplace, but their opposition has eroded in recent months as the crisis in the financial industry and economy have deepened.
The officials who described the emerging proposal did so on condition of anonymity, saying they were not authorized to discuss it.
McConnell also said Republicans favor cutting the two lowest tax brackets as a way to “ put money back in people’s hands directly.” They want to reduce the tax rate from 10 percent to 5 percent for the first $8,350 in individual income for the current year, and $16,700 for couples. The tax rate would be lowered from 15 percent to 10 percent on income between $8,351 and $33,950 for individuals and between $16,001 and $67,900 for couples.
Obama and the Democrats favor a different approach. The legislation provides a cut of $500 for workers and $1,000 for working couples, even if they do not earn enough in wages to pay income taxes.
Separately, Democrats privately conceded they may wind up reducing spending that has come under withering fire in recent days from Republicans.
Last week, House Democrats jettisoned money to reseed the National Mall and a provision to make it easier for states to offer family planning services to the poor under Medicaid.
Democrats hold a commanding 58-41 majority in the Senate, but some of their more moderate and conservative members are pushing to trim spending. There was pressure on the leadership in the form of bipartisan amendments to reduce spending.
As a result, the outcome of the debate on the measure is far less clear than it was in the House, where leaders had the votes to enforce their will.
The political environment changed since House Republicans voted unanimously against the bill last week. Public opinion polls show strong support for a package of tax cuts and spending increases to remedy the worst economic downturn since the Great Depression. But Obama is now on the spot, having pledged to GOP lawmakers that he would make changes in the bill once it reached the Senate.