President Barack Obama’s economic agenda took a big step closer to passage in Congress as House and Senate Democrats reached agreement Wednesday with moderate Senate Republicans on a $789 billion two-year package that will be brought to the floor this week.

Senate Majority Leader Harry Reid (D-Nev.) made the formal announcement flanked by three Republicans whose votes he will need in the Senate. A formal House-Senate conference was scheduled for this afternoon to review the package, and the House hopes to file a final bill Wednesday night.

The action caps a long night of Capitol negotiations with Speaker Nancy Pelosi (D-Calif.) joining Reid in overcoming last hurdles.

Driving them – and the entire process — is Obama himself. In the last 24 hours the president has stepped forward to put his stamp on the package and defuse intra-party wrangling while also putting new options on the table including scaling back his own tax cuts.

“Basically it is whatever Obama wants,” said one House staffer.

In the face of the continued market turmoil and a troubled economy, action seems a first priority for the administration.

Many details on the final package remain unavailable, but by scaling back the total cost to below the Senate and House passed packages, the administration hoped to gain some latitude as to where the final money would go.

Senate Finance Committee Chairman Max Baucus (D., Mont.) estimated that 35 percent, or $276.1 billion, of the bill would be “pure” tax cuts. Included in the package is continued relief for middle and upper middle income taxpayers threatened by the Alternative Minimum Tax. And to make the numbers fit, an administration office said Obama’s signature “Making Work Pay” tax break would be scaled back to $400 for individuals and $800 for couples — down from $500 and $1000 respectively.

House and Senate clerks worked through the night to craft a package within the new format which Reid took back to Republican moderates and Democratic conservatives like Nelson Wednesday morning.

White House Chief of Staff Rahm Emanuel came to the Capitol for the talks and both he and Budget Director Peter Orszag spent much of Tuesday shuttling between House and Senate leadership offices.

“I see some real possibilities,” Senate Appropriations Committee Chairman Daniel Inouye (D-Hawaii) told Politico Tuesday night. And Baucus said it is now “very possible” that an agreement could be reached Wednesday. “They’re trying to get what needs to get done,” said Emanuel.

Just three Republicans — Collins, Sen Olympia Snowe of Maine and Sen. Arlen Specter of Pennsylvania — supported the $838 billion, two-year package during the pivotal roll calls leading to passage Tuesday. Going forward, the president’s challenge was to retain this support while also bridging a rural-urban divide in his own party on issues such as Medicaid funding.

House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) said the tentative deal calls for 65 percent of the money to be distributed according to the Senate’s more rural formula; 35 percent as the more urban House wanted.

In the same talks, the House appears to have preserved its higher 65 percent subsidy to help laid- off workers meet COBRA payments to maintain employer-provided health insurance; the Senate had proposed 50 percent. But the House agreed in turn to drop its proposal to increase Medicaid coverage to help lower income individuals face the same insurance dilemma and can’t afford to pay even a subsidized COBRA payment.

To a remarkable degree, Obama has skirted by until now, promoting the competing House and Senate bills and never making public his full requests for new spending and tax breaks. That is beginning to change, just as the past 24 hours have seen the administration take a much more aggressive posture in putting forward its economic program.

Perhaps nothing captured this more than Obama’s televised prime-time press conference Monday night, which was followed Tuesday morning by Treasury Secretary Timothy Geithner’s speech on the continued crisis in the credit markets. Born within weeks of one another in 1961, the two men reflect a new generation of leadership taking the nation — and economy — in new directions in the face of what all agree is a historic and often frightening crisis.

“It is essential for every American to understand that the battle for economic recovery must be fought on two fronts,” Geithner said in his speech in Treasury’s famous Cash Room. “We have to both jump-start job creation and private investment, and we must get credit flowing again to businesses and families.”

(Source: Politico)