Obama's economic stimulus plan passed by Senate

US President Barack Obama’s economic stimulus plan was today passed by the Senate but with limited Republican support.

The $838bn (€651.5bn) package of tax breaks and public spending projects was approved by a 61 to 37 votes, after just three opposition senators were persuaded to back the bill.

Although a version of the plan had now been passed by both houses in Congress, the package still faces a battle before it can be signed off by the President.

Difference between the two bills will have to be reconciled, with Republican senators unlikely to be willing to give up the concessions they have won in negotiation.

Mr Obama heard news of the Senate’s approval while speaking to crowds in Florida about the economy.

Responding to the narrow “yes” vote, he said: “This is good news. We have still got to get the House bill and the Senate bill to match up.

“We have a little more work to do over the next few days, but it is a good start.”

The lack of true bi-partisan support will come as a disappointment to the administration – no Republicans voted for the bill in the House of Representatives.

But the fact that it has passed will mean that Mr Obama is on course to sign off on the bill by President’s Day next Monday, as he has previously expressed a desire to do.

The bill will now go to a joint committee to reconcile the two different bills. A sticking point could be the US$108bn in spending that was cut from the House bill to entice Republicans in the Senate. The version approved by Senators is heavier on the tax relief side.

Over the last few days, Mr Obama has repeatedly pushed the urgent need for action over the economy, warning that a crisis could quickly become a catastrophe.

Today’s move in the Senate came as steps by the Treasury and Federal Reserve bumped the overall combined cost of measures to revive the economy and free-up the money markets towards three trillion US dollars (2.3 trillion euros).

Treasury secretary Timothy Geithner said that an “aggressive” policy on two fronts was needed to pull the US out of “the worst economic crisis for generations”.

He said the strategy would be expensive and would involve risk. But he added that the alternative cost of a complete collapse of the financial system would be “incalculable”.

Measures by the Treasury announced today will add to its 700bn (€544.25bn) financial rescue programme for the banking system, half of which has already been spent.

It comes as the Federal Reserve announced it was to expand its lending facility to as much as one trillion US dollars (€777bn) in a bid to get money flowing again.

Mr Geithner has been tasked with overhauling the US’s financial rescue programme, which has been criticised for its lack of accountability.

The Treasury Secretary pledged to fundamentally reshape the bank bail-out package. Banks will be monitored to make sure they are lending the money to businesses and individuals.

As part of the financial rescue plan, the Government will also work with the private sector to get investors to buy up bad assets from banks.

Mr Geithner also pledged at least US$50bn (€38.9bn) of the remaining $350bn (€272.2bn) rescue fund to help struggling homeowners.

Announcing the changes to the bail-out plan, the Treasury Secretary said: “The battle for economic recovery must be fought on two fronts.

“We have to both jump start job creation and private investment and we must get credit flowing again to businesses and families.”

With an eye to what was going on in Congress, Mr Geithner highlighted the failure of slow action when it came to saving the economy to date.

He said: “When the crisis began, governments were slow to act, when action came it was late and inadequate, policy was behind the curve.”

As such, policy had to be “comprehensive and forceful”, he said.

Mr Geithner continued: “There is more risk and greater cost in gradualism than there is in aggressive action. We believe that action has to be sustained until recovery is firmly established.”

He added: “This strategy will cost money, it will involve risk and it will take time. But as costly as this effort may be, the cost of a complete collapse of our financial system will be incalculable for families and businesses and for our nation.”