Wednesday, February 04, 2009

A Clear Take On The Stimulus Bill

From WSJ on 1/28/09

A 40-Year Wish List
You won't believe what's in that stimulus bill.
"Never let a serious crisis go to waste. What I mean by that is it's an opportunity to do things you couldn't do before."

So said White House Chief of Staff Rahm Emanuel in November, and Democrats in Congress are certainly taking his advice to heart. The 647-page, $825 billion House legislation is being sold as an economic "stimulus," but now that Democrats have finally released the details we understand Rahm's point much better. This is a political wonder that manages to spend money on just about every pent-up Democratic proposal of the last 40 years.

We've looked it over, and even we can't quite believe it. There's $1 billion for Amtrak, the federal railroad that hasn't turned a profit in 40 years; $2 billion for child-care subsidies; $50 million for that great engine of job creation, the National Endowment for the Arts; $400 million for global-warming research and another $2.4 billion for carbon-capture demonstration projects. There's even $650 million on top of the billions already doled out to pay for digital TV conversion coupons.

In selling the plan, President Obama has said this bill will make "dramatic investments to revive our flagging economy." Well, you be the judge. Some $30 billion, or less than 5% of the spending in the bill, is for fixing bridges or other highway projects. There's another $40 billion for broadband and electric grid development, airports and clean water projects that are arguably worthwhile priorities.

Add the roughly $20 billion for business tax cuts, and by our estimate only $90 billion out of $825 billion, or about 12 cents of every $1, is for something that can plausibly be considered a growth stimulus. And even many of these projects aren't likely to help the economy immediately. As Peter Orszag, the President's new budget director, told Congress a year ago, "even those [public works] that are 'on the shelf' generally cannot be undertaken quickly enough to provide timely stimulus to the economy."

Most of the rest of this project spending will go to such things as renewable energy funding ($8 billion) or mass transit ($6 billion) that have a low or negative return on investment. Most urban transit systems are so badly managed that their fares cover less than half of their costs. However, the people who operate these systems belong to public-employee unions that are campaign contributors to . . . guess which party?

Here's another lu-lu: Congress wants to spend $600 million more for the federal government to buy new cars. Uncle Sam already spends $3 billion a year on its fleet of 600,000 vehicles. Congress also wants to spend $7 billion for modernizing federal buildings and facilities. The Smithsonian is targeted to receive $150 million; we love the Smithsonian, too, but this is a job creator?

Another "stimulus" secret is that some $252 billion is for income-transfer payments -- that is, not investments that arguably help everyone, but cash or benefits to individuals for doing nothing at all. There's $81 billion for Medicaid, $36 billion for expanded unemployment benefits, $20 billion for food stamps, and $83 billion for the earned income credit for people who don't pay income tax. While some of that may be justified to help poorer Americans ride out the recession, they aren't job creators.

As for the promise of accountability, some $54 billion will go to federal programs that the Office of Management and Budget or the Government Accountability Office have already criticized as "ineffective" or unable to pass basic financial audits. These include the Economic Development Administration, the Small Business Administration, the 10 federal job training programs, and many more.

Oh, and don't forget education, which would get $66 billion more. That's more than the entire Education Department spent a mere 10 years ago and is on top of the doubling under President Bush. Some $6 billion of this will subsidize university building projects. If you think the intention here is to help kids learn, the House declares on page 257 that "No recipient . . . shall use such funds to provide financial assistance to students to attend private elementary or secondary schools." Horrors: Some money might go to nonunion teachers.

The larger fiscal issue here is whether this spending bonanza will become part of the annual "budget baseline" that Congress uses as the new floor when calculating how much to increase spending the following year, and into the future. Democrats insist that it will not. But it's hard -- no, impossible -- to believe that Congress will cut spending next year on any of these programs from their new, higher levels. The likelihood is that this allegedly emergency spending will become a permanent addition to federal outlays -- increasing pressure for tax increases in the bargain. Any Blue Dog Democrat who votes for this ought to turn in his "deficit hawk" credentials.

This is supposed to be a new era of bipartisanship, but this bill was written based on the wish list of every living -- or dead -- Democratic interest group. As Speaker Nancy Pelosi put it, "We won the election. We wrote the bill." So they did. Republicans should let them take all of the credit.


Tom Goering said...

"$600 million more for the federal government to buy new cars."

Not to mention the cash the car companies will pull in under the "Global warming, clean air" research initiatives in the bill.

Bail out loans and this "stimulus" bill will once again allow the automakers not to have to confront the UAW.

Stella said...

Education is a long-term stimulus package. The previous education bill taught children how to study for a test, not learn to think independently. It's costly, yes, but worth improving our schools.

I have a passion for trains, so I'm fine with the $1 billion for Amtrak. Absolutely, they haven't turned a profit in 40 years, but they are a part of American history. I'm not rational about trains, Maggie, so I can't conduct a rational argument. It's definitely not a stimulus, per se.

I'm OK with $50 million for the NEA. College is so expensive now, and many students must rely on federally funded grants to get through grad school. I feel the same about the Smithsonian. Is it stimulus? Possibly...

The global warming research and carbon-capture products could also ween us off foreign oil. I feel the same bout broadband and electric grid development, airports, and clean water projects. All of these project create jobs.

More money into our sagging infrastructure—bridges and highways? Absolutely. And many more jobs.

The global warming money will go to more than just car companies: the funds will go to power companies and big oil. They don't need the money as much as most, but if we become more independent from foreign oil, I think we can both create jobs and make America independent.

Income-transfer payments. No, these won't help everybody, but many of the recipients are the working poor that do, in fact, pay income tax.

$81 billion for Medicaid: see the NCHC. Over 8 in 10 uninsured people come from working families – almost 70 percent from families with one or more full-time workers and 11 percent from families with part-time workers.

$36 billion for expanded unemployment: although employment increased in 2004, most of those jobs were in retail and food service: mostly minimum wage.

$20 billion for food stamps: I would support this with the pairing that people must try to find employment.

$83 billion for the earned income credit for people who don't pay income tax: there's no choice on this one—600,000 Americans have lost their jobs or are working poor. Bush made the EITC more difficult to get for working families.

But don't think I don't agree with you with some of the provisions. That Congress wants to spend $600 million more for the federal government to buy new cars is insane. Excuse me? Since Congress is subsidizing Amtrak, Senators and Reps can ride the train to close locations.

And my favorite waste, although this one started in 2005. Those stupid TV conversion boxes at $650 million. That was a Bush policy that was passed by a Republican Congress 2005. The GOP gets the credit for that one.

Much of this budget has a lot to do with so many Americans losing their jobs thanks to the GOP's NAFTA. Yes, Clinton signed the bill, so this is a bipartisan mess. Perhaps in many ways the budget package isn't a true economic stimulus. However, some of the "stimulus" provisions concernt long- as well as short-term goals.

Whether this package helps the economy, I don't know. I'm just going with my gut here. But, thank you for this post. I like knowing where my tax dollars go.

Stella said...

More from the stimulus bill..
$365.6 billion for construction projects, to improve the health care system and other priorities. (I hope they include Walter Reed and other VA facilities.)

$522 billion in tax cuts and other spending provisions on programs like health care and grants to states. It also includes a one-year fix of the Alternative Minimum Tax to shield middle-class taxpayers from paying a tax originally intended only for the wealthiest taxpayers, a provision that alone costs almost $70 billion. (Tax cut?)

$500,000,000 for construction to upgrade or modify critical infrastructure, as defined in section 1016(e) of the USA PATRIOT Act of 2001 (42 22 U.S.C. 5195c(e)).

For an additional amount for ‘‘Federal Prison System, Buildings and Facilities’’, 1,000,000,000, to remain available until September 30, 2010.

Stupid, stupid, stupid: For an amount for ‘‘Digital-to-Analog Converter Box Program’’, $650,000,000, for additional coupons and related activities under the program implemented under section 3005 of the Digital Television Transition and Public Safety Act of 2005, to remain available until September 30, 2010.

Homeland Security: $248 billion. (Needed. This office was critically underfunded.)

Border Fencing: $200 billion. (I promise you: won't work...)

$800 billion for planning, management, design, alteration, and construction of U.S. Customs and Border Protection owned land border ports of entry.

If you stop by, you'll probably disagree with our annoyance on some of these issues and that we're not all that happy about this latest round of funding. But, as always, I welcome your thoughts, Maggie.