New York loses billions

New York suffered a setback yesterday when the Senate rejected a recovery plan that would have channelled about $17bn (£12bn) in federal aid to the city to help clear wreckage at Ground Zero and to begin rebuilding.

Democrats on Capitol Hill were thwarted in their efforts to attach the aid package to a broader bill that sets US defence spending. A more modest Republican plan was adopted in a late-night vote which will give New York about $9.5bn.

The vote ended days of intense partisan wrangling in Washington, with President George Bush vowing to veto the bill if it included the Democrat version of the emergency-spending programme, which would have included an additional $17bn to improve domestic security to thwart terrorism.

It was a victory for the White House but a big blow, in particular, for the two Democratic senators from New York – Hillary Rodham Clinton and Charles Schumer.

There has been growing frustration in New York over what may be a wavering commitment by President Bush to give as much help to the city and to the state as was originally promised. Immediately after the 11 September attacks, the President suggested the city would get $20bn in federal support without delay.

City finances in New York are looking as shaky as they have in years, with unemployment rising and a large hole opening in its budget. A new study warns that the terror attacks are likely to cost the city $7bn to $13bn in lost tourism revenue as well as 25,000 jobs in lost jobs in the travel industry.

"It's very disappointing," said Senate Majority Leader Tom Daschle, of South Dakota. "We have to face reality here ... it's not likely we're going to persuade our colleagues that it's an investment that we ought to be making."