U.S. House Speaker Nancy Pelosi (D., Calif.) said Thursday that the U.S. couldn't act without international cooperation to put in place a tax on financial transactions.
She said the idea has "substantial currency" among House Democratic lawmakers, but said it was just one of several ways being considered to pay for another job-creation package.
Her acknowledgement that the U.S. couldn't unilaterally implement such a tax would appear to leave its chances of being pursued minimal, given the difficulty of reaching international agreement on such a thorny issue.
Some House Democrats floated the idea of the tax as a way to raise revenue to pay for the cost of another economic stimulus bill. One proposal circulated this week could raise around $150 billion a year.
Rep. John Larson (D., Conn.), a member of the House leadership team, has been a strong backer of the tax. He said the Treasury could be allowed discretion over when it would be implemented, giving the administration time to negotiate an agreement with other countries.
But Treasury Secretary Timothy Geithner told lawmakers Thursday the administration opposed the idea.
"I have not seen a version of that kind of tax that I think would...work, be effective, and would be appropriate for our country," Geithner told a congressional hearing.
House Republican leaders agreed the idea was flawed and should be jettisoned.
"Any time we're talking about taxing capital formation threatens the very notion that we're going to return to some normalcy in terms of small business being able to access capital," Rep. Eric Cantor (R., Va.), the minority whip, said.
Pelosi said that Democrats were carefully considering what elements should be included in a legislative package aimed at spurring job growth in the economy.
"We are considering an array of issues to establish the priorities which are the most successful in producing jobs and reducing the deficit," she said.
These include spending on transportation infrastructure, increased aide to states so they can avoid layoffs, another extension of federal unemployment benefits and continuing tax measures that were included in February's $787 billion economic recovery plan.
There are a range of tax credits in the stimulus plan that are set to expire at the end of the year aimed at providing assistance to small businesses and consumers.
Pelosi played down the suggestion that Democrats are considering another large recovery package like the February stimulus plan.
There are a number of legislative vehicles that could be used to attempt to boost job creation, including the still incomplete annual spending process.
It is now widely expected that the unfinished must-pass spending bills for the current fiscal year will be rolled into a single piece of legislation in December. Additional measures aimed at stimulating the economy could be added to that bill.
Another option would be legislation to extend federal subsidies paid to states to cover the costs of road and bridge repairs. That program also expires next month and will need to be reauthorized.
Pelosi gave no indication of how large of a package would be necessary to breathe life into the moribund jobs market.
The U.S. unemployment rate hit a 26-year high of 10.2% in October, and most economists expect it to continue rising into next year.
Democrats are keenly aware they could be heading into a midterm election having increased the U.S. deficit to record levels, but with little to show for it in terms of an improved employment picture.
Pelosi said there was considerable support within the caucus to redirect unused funds in the Treasury's financial-rescue plan to lend taxpayer money to regional and community banks that account for much of the source of financing for small businesses.
The Obama administration said last month it hoped to work with Congress to use money in the Troubled Asset Relief Program to provide capital to smaller banks.
Cantor said Republicans would oppose this as well, saying the TARP was always intended to be temporary and not serve as a slush fund for the administration.
-By Corey Boles, Dow Jones Newswires; 202-862-6601; corey.boles@dowjones.com