Thursday, February 12, 2009

Digesting (Burp) The Stimulus Bill

I just finished digesting Congress's apparent $789 billion stimulus package and burped twice. The first was a case of mild heartburn. The second was indigestion caused by the feeling it isn't enough.

In trying to jump start our failed economy, the prevailing view among economists is the Keynesian approach: Beg, borrow, steal and print so much money to prime the pump that something is bound to work. Memo to Nobel economist Paul Krugman: You better be right.

Just thinking of the politics of this thing and how it was designed, diddled with and ultimately salvaged permeates the air with flatulence.

The House Democratic leadership -- Speaker Nancy Pelosi and committee chairmen David Obey, Barney Frank and Henry Waxman -- along with the liberal wing of the House failed to control themselves by placing pet projects in their bill allowing the Republicans to rub it in their noses. It took President Obama and three Republican senators to seal the deal from the jaws of defeat.

All those old liberal lions had to do was bide their time and place those projects -- aid to Hollywood filmmakers, restoring the Capitol Mall, purchasing contraceptives, etc. -- into the upcoming appropriations bill. Might even sneak in a few dozen earmarks. But, no, they had to flap their wings and dove the stimulus bill into a phoenix. No House Republican voted for their version of the bill.

Strange as it seems, the joint House conference committee actually lowered the final cost of the stimulus package from the House version of $820 billion, the Senate version of $838 billion to the final cut at $789 billion. It has outraged some liberal House members causing concern for Speaker Pelosi to postpone announcing victory until Friday.

The Republican response was predictable, according to the New York Times.

“This bill was meant to be a stimulus that was timely, targeted and temporary,” Sen. Mitch McConnell of Kentucky, the Republican minority leader, said Thursday on the Senate floor. “Unfortunately, it appears to be none of the above.” Since winning the White House and control of Congress, McConnell went on, “Democrats have been making up for lost time with a government spending spree on the taxpayer credit card.”

All sides had to give, and some programs dropped like stones.

That included President Obama’s signature middle-class tax cut proposal, which he initially promised would give individuals up to $500 and families up to $1,000. In the end, those numbers fell to $400 for individuals and $800 for couples, lopping about $30 billion from the cost of the original plan.

One of the single biggest reductions was a cut of $25 billion from a state fiscal stabilization fund that will largely be used for education. The House had proposed $79 billion; the Senate reduced it to $39 billion. The final agreement fell in between, with an added adjustment demanded by House Democrats that will allow states to use some of that money for the renovation and repair of school buildings.

That agreement came only after Republican Sens. Arlen Specter, Susan Collins and Olympia Snowe who were crucial to the deal insisted on removing a separate line-item that would have provided $16 billion for school construction.

Here is a synopsis of the major spending provisions in the final version of the stimulus package as reported by

Unemployment: $40 billion to provide extended unemployment benefits through Dec. 31, and increase them by $25 a week; $20 billion to increase food stamp benefits by 14 percent; $4 billion for job training and $3 billion in temporary welfare payments.

Direct cash payments: $14 billion to give one-time $250 payments to Social Security recipients, poor people on Supplemental Security Income, and veterans receiving disability and pensions.

Direct cash payments: $14 billion to give one-time $250 payments to Social Security recipients, poor people on Supplemental Security Income, and veterans receiving disability and pensions.

Infrastructure: $46 billion for transportation projects, including $27 billion for highway and bridge construction and repair; $8.4 billion for mass transit; $8 billion for construction of high-speed railways and $1.3 billion for Amtrak; $4.6 billion for the Army Corps of Engineers; $4 billion for public housing improvements; $6.4 billion for clean and drinking water projects; $7 billion to bring broadband Internet service to underserved areas.

State block grants: $8 billion in aid to states to defray budget cuts.

Energy: About $50 billion for energy programs, focused chiefly on efficiency and renewable energy, including $5 billion to weatherize modest-income homes; $6.4 billion to clean up nuclear weapons production sites; $11 billion toward a so-called "smart electricity grid" to reduce waste; $13.9 billion to subsidize loans for renewable energy projects; $6.3 billion in state energy efficiency and clean energy grants; and $4.5 billion make federal buildings more energy efficient.

Education: $47 billion in state fiscal relief to prevent cuts in state aid to school districts, with great flexibility to use the funds for school modernization and repair; $25 billion to school districts to fund special education and the No Child Left Behind law for students in K-12; $17 billion to boost the maximum Pell Grant (college tuition) by $500 to $5,350; $2 billion for Head Start.

Homeland Security: $2.8 billion for homeland security programs, including $1 billion for airport screening equipment.

Law enforcement: $4 billion in grants to state and local law enforcement to hire officers and purchase equipment.

Following are two of the tax credit proposals, according to MSNBC.Com.:

Homebuyer credit: $3.7 billion to repeal a requirement that a $8,000 first-time home buyer tax credit be paid back over time for homes purchased from Jan. 1 to August 31, unless the home is sold within three years.

New tax credit: Approximately $115 billion for a $400 per-worker, $800 per-couple tax credits in 2009 and 2010. For the last half of 2009, workers could expect to see perhaps $13 a week less withheld from their paychecks starting around June. Millions of Americans who don't make enough money to pay federal income taxes could file returns next year and receive checks. Individuals making more than $75,000 and couples making more than $150,000 would receive reduced amounts.

And to think the stimulus package is only a starter tool. The financial sector is expected to receive at least $350 billion more which appears to be a low ball estimate. After that the appropriations bill. Then defense. Energy. And let us not forget Obama's plans for reform of the health care system. Oh, yes, those nasty entitlement programs which keep the nation's elderly and poor afloat.

Oh, well, we're in a national government spending mode the likes of which we haven't seen. The bill will be paid by my grandchildren, their great grandchildren and their great-great grandchildren and their great-great-great grandchildren.

If it works.

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