We were hoping to report on the specifics of the stimulus bill agreed to by a House and Senate Conference Committee yesterday, but as it turns out, the full legislation still isn’t available and the House of Rules Committee even went so far as to waive requirements that the bill be publicly available for forty-eight hours before being put to a vote.
Improvements over Senate Version
Overall, there seem to be some major improvements over the Senate bill. Some important changes include:
- After food stamp funding that passed the House was slashed in the Senate version, the compromise grants $20 billion in food stamp benefits.
- Nearly $46 billion will fund education and modernize schools, “considerably higher than the Senate’s $39 billion total but far less than the House’s $95 billion.”
- Allocates $30 billion for smart grid technology, advanced batteries, and energy efficiency measures, along with $5 billion for home weatherization and $4.5 billion to make federal buildings more energy efficient — closer to the House version than the Senate’s.
- “Drastically reduced” the Senate’s $15,000 tax credit for new home buyers, “placing income limits on who could benefit and reducing the overall cost from $35 billion to about $5 billion.”
- “All but eliminated” a big business giveaway that would have allowed money-losing companies to claim an estimated $67.5 billion in tax refunds this year and next — a tax cut with the least stimulative impact per dollar, according to the Congressional Budget Office.
- Loan guarantees to the Nuclear industry were removed.
The left-leaning Economic Policy Institute cited the following positive aspects of the stimulus bill:
- First, it provides major public investments in transportation, water resources, education, health, science, and energy that will provide employment now but also improve productivity, energy efficiency, and educational attainment in the years ahead.
- Second, there are important social supports provided to low-income families (child tax credit, earned income tax credit, increased nutritional assistance) and to the unemployed (extended and higher benefits) that will assist these vulnerable groups. We know from experience that providing income supports to these populations will lead to increased consumption that helps boost the overall demand for goods and services and thereby generate employment.
- Third, the package’s fiscal relief for state and local governments provides a quick boost to employment as it prevents the scaling back of programs that are needed and that employ not only public employees but also an extensive array of private sector contractors.
- Fourth, the “Making Work Pay” tax relief in the package will provide an income boost to 95% of American workers, and because it is better targeted than earlier tax cuts (2001 and 2003), it will help boost consumer spending and create jobs.
Still Some Flaws in the Plan
Only $513 billion of the bill’s $789 billion price tag focuses on spending, with $276 billion being used for tax breaks that likely will have little effect in stimulating the economy. In particular, a staggering 9% of the bill’s dollar value is dedicated to restructuring the Alternative Minimum Tax that will have no direct effect on the economy.
The Economic Policy Institute stated:
“Unfortunately, the package contains spending that will be far less effective. The changes to the alternative minimum tax in this package will have a minimal effect on consumption or jobs. And the significant reductions in business taxes will be of little benefit. Again, this is unfortunate because businesses will increase their investments and maintain or add employment only when they can profitably sell to customers. These business tax breaks will clearly improve profits, but without more customers, these tax breaks will have a modest employment impact at best.”