Senate's Reverse-Midas Touch Turns Economic Recovery To Dung
When the initial Obama recovery plan came to the Congress, it had about a 40%-60% ratio between spending and tax cuts. That got reduced to around 33%-67% in the House bill. Based on the amendments that have passed and the inclusion of the AMT patch in the Senate, if the axis of Nelson-Collins are successful in scooping out $100 billion in spending that percentage could be closer to 50%-50%. This is especially true because the ridiculous home-buyer credit, passed last night, is now twice as costly as once imagined.
The measure, which had been championed by GOP Senator Johnny Isakson, would give $15,000 (or 10 percent of the purchase price, whichever is lower) to every person who buys a home in 2009.
As late as this afternoon, the overall price tag allotted for this measure was around $18.5 billion.
But the ultimate real world cost of this measure has been disputed, with some critics predicting that it would cost much more, given the expected levels of housing sales this year.
Turns out the critics may have been right. The nonpartisan Joint Committee on Taxation has just sent a letter to Chuck Schumer, who’s on the Finance Committee, responding to Schumer’s request that the Committee score an estimate of the measure’s cost.
The total price estimated by the Committee? $35.5 billion — double the original cost, says the letter, which was sent our way by Schumer’s staff.
So now we have a $35 billion dollar bailout for the mortgage industry in this bill, and the offsets are coming from state and local government relief, so county hospital workers and cops and firefighters can be thrown out of work?
This is lunacy. Robert Reich has an on-point explanation of how this debate SHOULD have gone, if we lived in a marginally sane country.
Regardless of your ideological stripe, you've got to see that when consumers and businesses stop spending and investing, there's only entity left to step into the breach. It's government. Major increases in government spending are necessary, and the spending must be on a very large scale. In the last several weeks the President has put forward the outlines of a stimulus plan, and has left it to the House and Senate to fill in the details. A tiny portion of the details that made it into the House version should be stripped away because they seem like old-fashioned pork. But most spending in the bill is absolutely appropriate. My worry is there's not nearly enough of spending to fill the shortfall in overall demand.
Yet at this very moment, Senate Republicans are seeking to strip the President's stimulus package of many of its spending provisions and substitute tax cuts. Part of this is pure pander: They know tax cuts are more popular with the public than government spending, even though spending is a far more effective way to stimulate the economy (more on this in a moment). Another part is pure partisan politics: Republicans are emboldened by Obama's willingness to court Republicans (taking three Republicans into his cabinet, bringing Republican leaders into the White House for consultations, putting all those business tax cuts into the stimulus bill in order to gain Republican favor) without getting anything at all back from the GOP. House Republicans snubbed the bill entirely. So, Senate Republicans say to themselves, what's to lose?
Plenty. Millions more jobs and a full-fledged Depression, for example.
We're adding in tax cuts that people will either give to bankers to pay down debt or keep in savings accounts in case they're the next to get fired. Maybe they'll buy some cheap crap from China. And we're taking out spending that can give people jobs and circulate multiple times through the economy to increase demand. This is so stupid.
Here's the deal. Obama pre-compromised with 40% tax cuts. That's too high, and I'd prefer having only the targeted, progressive tax cuts (like the child tax credit, tuition tax credit, and reduction in withholding) in there, but let's take the midpoint between Obama's initial offer and the House bill. That's 37.5% tax cuts. That ratio should be FIXED. If you add tax cuts in, you have to take tax cuts out so the ratio stays the same. If you want to give $35.5 billion to home buyers, you can eliminate those worthless business tax cuts in the exchange. Obama should announce that the ratio must be preserved or he cannot accept the bill. Veto threats work. These people cave.
...Maybe he'll do that this Monday. Greg Sargent reports that Obama will hold a nationally televised news conference. Maybe he can explain what a stimulus is and why it's needed, as well.