Dems, GOP to huddle on stimulus

House Democratic leaders are to meet with their Republican counterparts Wednesday to discuss the possible contents of an economic stimulus package meant to help stave off a possible recession.

The meeting comes as some leading Democrats suggest pay-as-you-go budget rules should be waived for an economic stimulus package if the country faces an emergency. Such a move would be controversial within the party, especially with conservative Blue Dog Democrats.

{mosads}House Majority Whip James Clyburn (D-S.C.) on Tuesday suggested that he could support waiving pay-go rules if economic conditions merited the move.

“Pay-go does not apply in an emergency,” Clyburn told reporters after delivering remarks at the U.S. Chamber of Commerce. The third-ranking Democrat in the House, Clyburn said he did not know who would make the determination of whether there is an emergency, but added that if unemployment continued to climb and the housing situation worsened, “it would be an emergency by my definition.”

Clyburn went further than House Speaker Nancy Pelosi (D-Calif.) and other Democratic leaders, who have not addressed whether a package should meet pay-go rules.

Clyburn joined a statement from Democratic leaders issued later in the day Tuesday emphasizing that bipartisan action was necessary to get the economy back on track. The statement issued by Clyburn, Pelosi, Majority Leader Steny Hoyer (D-Md.) and Caucus Chairman Rahm Emanuel (D-Ill.) did not mention whether budgetary rules should be waived.

“We are working to find common ground with President Bush and congressional Republicans to craft a bipartisan stimulus plan that is timely, targeted and temporary,” the statement said.

Pelosi and Hoyer are scheduled to meet with House Minority Leader John Boehner (R-Ohio) and Minority Whip Roy Blunt (R-Mo.) this afternoon. Both sides in recent days have said they want to reach a bipartisan deal on the package’s contents.

Clyburn also said payroll tax rebates should be included in the stimulus package because this would spur the economy.

The move would violate the budget rules Democrats adopted after winning control of Congress, and Blue Dogs revolted last fall after Democratic leaders decided to waive pay-go to pass a one-year patch offsetting the Alternative Minimum Tax (AMT).

The two main contenders for the Democratic presidential nomination, Sens. Hillary Rodham Clinton (N.Y.) and Barack Obama (Ill.), have both suggested pay-go rules should be waived for the stimulus package.

House Republicans on Tuesday called for the stimulus package to exclude tax increases to pay for the stimulus package. Boehner and Blunt, in a letter to Pelosi, warned that anything perceived as tax increases would delay the process.

“We request that you and the Democratic leadership in both the House and Senate agree to take tax increases — in any form — off the table as we negotiate an economic stimulus package,” they wrote. “This is of particular concern to us because of the $250 billion in tax increases cleared by the House last year — many of which were masked as ‘offsets’ to comply with ‘PAYGO’ rules.”

House Republican Conference Chairman Adam Putnam (R-Fla.) at a Tuesday press conference said worries about the economy have replaced Iraq as the top concern in GOP districts. “The fact that it has overtaken Iraq is due to the anxiety [of constituents] toward the economy,” said Putnam, who added that military success in Iraq has also played a role.

Pocketbook concerns will probably dominate an upcoming Senate GOP gathering, at which Republicans will likely discuss how to gain the upper hand in the economy and healthcare debates.

Clyburn argued that refunding to workers and employers a portion of their payroll or Federal Insurance Contributions Act (FICA) taxes would spur the economy.

“A four-, five-, six-hundred-dollar rebate of FICA taxes so everybody can participate in this, I think that’s the way to go,” he said.

Meanwhile, he rejected including a corporate tax cut in any stimulus package. “It doesn’t get us there,” he said.

Payroll tax rebates would be a strong candidate for any Democratic stimulus plan because they would benefit poor or middle-income families relatively more than wealthy ones. In 2008, payroll taxes are imposed on the first $102,000 of gross wages.

Citing that fact, Clyburn argued that families under more financial strain would spend rather than save any rebates. “These people are more likely to put the money in the economy where it needs to be put.”

Mike Soraghan contributed to this report.