Senate approves homebuyer tax break

Hopes to jolt industry with 10% credits

Senator Jim DeMint (center), Republican of South Carolina, spoke against the proposed economic stimulus package. (Jason Reed/reuters)

WASHINGTON - The Senate voted last night to give a tax break of as much as $15,000 to homebuyers in hopes of revitalizing the housing industry, a victory for Republicans eager to leave their mark on a mammoth economic stimulus bill at the heart of President Obama's recovery plan.

The tax break was adopted without dissent, and came on a day in which Obama pushed back pointedly against Republican critics of the legislation even as he reached across party lines to consider scaling back spending.

"Let's not make the perfect the enemy of the essential," Obama said as Senate Republicans stepped up their criticism of the bill's spending and pressed for additional tax cuts and relief for homeowners.

He warned that failure to act quickly "will turn crisis into a catastrophe and guarantee a longer recession."

Democratic leaders have pledged to have legislation ready for Obama's signature by the end of next week, and they concede privately they will have to accept some spending reductions along the way.

Senator Johnny Isakson, a Georgia Republican, said the homebuyers tax break was intended to help revive the housing industry, which has virtually collapsed in the wake of a credit crisis that began last fall.

The proposal would allow a tax credit of 10 percent of the value of new or existing residences, up to a $15,000 limit. Current law provides for a $7,500 tax break for the purchase of new homes only. Isakson's office said the proposal would cost the government an estimated $19 billion.

Democrats readily agreed to the proposal, although it may be changed or even deleted as the stimulus measure makes its way through Congress over the next 10 days or so.

"This bill needs to be cut down," Mitch McConnell of Kentucky, the top Republican in the Senate, said on the Senate floor. He cited $524 million for a State Department program that he said envisions creating 388 jobs. "That comes to $1.35 million per job," he added.

After days of absorbing rhetorical attacks, Obama and Senate Democrats mounted a counteroffensive against Republicans who say tax cuts alone can cure the economy.

Obama said the criticisms he has heard "echo the very same failed economic theories that led us into this crisis in the first place, the notion that tax cuts alone will solve all our problems."

The president repeated his retort in late afternoon, yet softened the partisan impact of his comments by meeting at the White House with senators often willing to cross party lines.

His first visitor was Senator Olympia Snowe of Maine, a moderate GOP lawmaker. Later he met with Senator Susan Collins, a Maine Republican, and Ben Nelson, a Nebraska Democrat. Collins and Nelson have been working on a list of possible spending cuts totaling roughly $50 billion, although they have yet to make details public.