Paulson Worried Bazaar Open on Senate Stimulus Bill

WASHINGTON (Reuters) – U.S. Treasury Secretary Henry Paulson said onWednesday he was concerned special-interest groups were lining up forhandouts in an economic stimulus bill and urged senators to keep itfocused on simple tax rebates.

Paulson, testifying before the Senate Budget Committee, said he didnot want to spend money "that really isn’t stimulus" as part of theapproximately $150 billion spending package now under consideration inthe Senate.

"I am increasingly concerned that in the Senate, the bazaar is open,the special interests are coming to the trough and that when I’mreading about and hearing about things like tax rebates for coalcompanies, the benefits for oil well drilling and things like this, I’mconcerned that it’s going to get bogged down," Paulson said.

"I’m concerned if we see things that aren’t stimulus and aren’tgoing to get money to the American people quickly, we’ll get boggeddown." he added.

Paulson said he would prefer to see the Senate pass the House ofRepresentatives’ $146 billion stimulus bill, which relies mainly on taxrebate checks and faster expensing of business equipment purchased thisyear.

He reiterated that extending unemployment benefits, a provisionbacked by many Democratic senators, was unnecessary given the current4.9 percent unemployment rate, which is low by historical standards.Further actions could be discussed with Congress if economic conditionsworsen, Paulson said.

However, he said he thought an agreement could be reached on Senaterequests to have the stimulus cover veterans and senior citizens whowould not receive rebate checks under the House plan.

Paulson’s comments drew the ire of Senate Majority Leader HarryReid, who said he was "offended" by suggestions that the Senate wasopening government coffers to special interests.

Reid, a Nevada Democrat, said Paulson would have to explain hisremark to those who have been unemployed for an extended period anddisabled veterans who would get expanded benefits under the SenateFinance Committee bill, as well as struggling home builders, who havebeen lobbying for help.

"I think Mr. Paulson’s been hanging around the White House too long," Reid said. "He’s not that kind of a man."

Paulson also cautioned senators against passing legislation aimed atforcing China to raise the value of its yuan currency, saying such aneffort was "bordering on the silly."

"I have engaged very actively with China. Engaged — and I thinkwith some results — when you look the currency," Paulson told theSenate Budget Committee. "Don’t be confused by the fact that I say I’dlike them to move quicker, because I would like them to move quickerbut their rate of appreciation of the currency roughly doubled lastyear to 6.7 percent."

Paulson also said the U.S. corporate tax system was inefficient andwas putting American firms at a competitive disadvantage in the globaleconomy.

He told the Senate Budget Committee that many countries now havelower nominal corporate tax rates than the United States and that othernations were not emulating the form of U.S. corporate taxes.

"I think in many ways the most expensive tax dollars we raise interms of inhibiting competitiveness and jobs and growth are the way wetax our businesses that compete globally," Paulson said.

(Reporting by David Lawder; Editing by Jonathan Oatis)

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