He offered to cut a request for $15 billion in anti-terrorism spending in half in response to a Republican offer of a month-long payroll tax holiday.
The Senate is debating the composition of a roughly $75 billion package of incentives to help nudge the economy out of the current recession, but cannot agree even on the terms of negotiations let alone the composition of the bill.
Democrats insist on more spending on benefits for the unemployed, homeland defense, bio-terrorism protection and other appropriations. Senate Republicans -- backed by the White House -- prefer to eliminate the alternative minimum corporate tax and Tuesday proposed a temporary elimination of the Social Security payroll tax and split the benefits between employers and employees.
Daschle, after meeting with President Bush Wednesday, proposed removing the homeland security spending from the stimulus package, cutting it in half to $7.5 billion and adding it to a defense appropriations bill instead of the stimulus package.
This concession set the stage for a meeting Wednesday evening between key members of both parties in an attempt to reconcile their two approaches to the bill.
After weeks of stalemate, even a meeting is a significant move forward. Democrats had been offering to meet with Republicans under the condition that the House, Senate and White House participate in the meeting. Republicans refused to hold such talks until Daschle removed the requirement of $15 billion of new appropriations from his proposal.
By slashing the figure in half and sending it to the defense appropriations bill, Daschle has effectively met those demands.
"The Democrats blinked," said one Hill staffer.
Sen. Pete Domenici, R-N.M., Tuesday proposed a month-long holiday on Social Security payroll taxes, which would immediately reduce taxes by about 6 percent for both workers and employers, a plan received by some in both parties as interesting.
Some have expressed concern that the plan would require action by state legislatures, which could delay implementation, but one Senate supporter said it could be quickly resolved.
"It absolutely could be in place quickly," Sen. Olympia Snowe, R-Ma., said. "A state legislature could do it in a one-day session. My husband was governor and let me tell you something, if someone thought that this would work to help their state, they'll move heaven and earth to pass it."
Snowe is married to former Maine Governor John McKernan (R).