Obama and Congress seek deal on economic stimulus

WASHINGTON (Reuters) - Republicans in the Senate accepted on Thursday President Barack Obama's offer to search for a compromise on an economic stimulus bill that could end up costing around $900 billion, as long as tax cuts play a large role.

The Senate is expected to start considering the massive bill next week, following passage on Wednesday in the House of Representatives of a slightly smaller bill, without the support of a single Republican.

"We look forward to offering amendments to improve this critical legislation," Senate Republican Leader Mitch McConnell said.

Congress is rushing to meet a mid-February deadline set by Obama for enacting the legislation.

The House bill was touted as costing $825 billion, but might be closer to $819 billion when accounting for its future impact on the deficit. The Senate bill, with different tax components, would come close to $900 billion.

The sharp divide in the House prompted the White House to repeat its call for the bipartisanship Obama keeps searching for.

"The president's going to continue reaching out to Republicans. He did so even last night after the vote," White House spokesman Robert Gibbs said on ABC's "Good Morning America." Congressional Republicans were among guests invited to the White House after the House passed the bill.

Obama says he wants to work with Republicans as he not only pushes the stimulus package but looks ahead to other major initiatives, such as expanding health care, stemming global warming and revamping the financially troubled Social Security retirement program.

MORE TAX CUTS

McConnell said a main goal for the Senate Republicans will be to increase the amount of tax cuts in the package so they amount to 40 percent of the overall measure, with the rest in emergency spending.

The House-passed bill is closer to 33 percent being devoted to tax cuts -- not hugely different from McConnell's goal.

The Senate Republican leader's formula contrasted with what many House Republicans sought: only tax cuts and no new spending at all to jump-start an economy that has been in a recession for more than a year.

The Senate will begin its debate next week with fresh statistics that likely will underscore the dire shape of the U.S. economy.

On Friday, the government will issue its latest estimate of U.S. gross domestic product. Many economists think it will show that the economy suffered a 5.4 percent contraction last year, which would be the worst performance since 1982.

Data released on Thursday showed the number of U.S. jobless claiming benefits jumped to a record in mid-January, and new orders for durable goods fell for a fifth straight month in December, while sales of newly built single-family homes slumped to their lowest levels since records started in 1963.

Meanwhile, U.S. stocks fell in early trading on Thursday following other bleak economic news, including rising unemployment figures and a continued decline in new orders for manufactured goods and new home sales.

Beyond calling for more tax cuts, McConnell said a jobs-creating economic stimulus bill should be devoid of questionable spending. "Are these projects necessary? Will they stimulate the economy? Will they create jobs?" he asked.

During Wednesday's House debate, Republicans mocked some of the spending items in the Democratic bill, such as expanded funding for the arts.

House Appropriations Committee Chairman David Obey countered that community arts organizations have suffered job losses, like other sectors, during the deep recession and he accused Republicans of focusing on the trivial in the bill and behaving "like a 1,000 mosquitoes to harass the majority."

(Additional reporting by Tabassum Zakaria and Thomas Ferraro, editing by Patricia Zengerle and David Wiessler