The Suburban Amendments
On balance, if the recovery package stays relatively the same size after the conference committee, I think it's a pretty good start. The fact that Obama is standing firm on the size of it is relieving. If cuts need to be made, however, I know several good places to start - with many of these craptastic Senate amendments that have been passed over the last couple days, in particular the "suburban amendments."
First there's the amendment giving tax credits to new-car buyers. Given the new emissions standards, this would make sense if it modernized the American fleet. But it's too early just to give a blanket credit without targeting emissions, so this amounts to keeping the sprawl economy alive. And it does nothing in particular for the battered US auto industry. It just rewards people who have the money to buy a new car. That's not who needs to be helped. Also, the greater problem with the car market, if I understand it correctly, is that nobody can secure an auto LOAN. Yet this tax credit only kicks in if you can.
Worse is this truly awful amendment, an effort to reinflate the housing bubble. Right, because that crash didn't cause too much pain.
The Democratic-led U.S. Senate Wednesday moved to attract needed Republican support for a massive economic stimulus bill by approving an expanded tax credit for home buyers, as other senators worked on ways to remove spending they say will not heal the economy.
By voice vote, the Senate accepted the housing amendment, potentially adding to the cost of the $900 billion bill that Democratic leaders hope to finish in coming days.
The amendment would expand for one year an existing $7,500 tax credit for first-time home buyers to all purchasers of principal residences. And it would boost the credit as high as $15,000, or 10 percent of the home price, whichever is less.
This is just completely stupid. Home prices aren't where they should be yet. All this would do is artificially inflate the market and keep it from bottoming out. The way to fix housing is to keep people in their homes and stop foreclosures. This just gives people a tax giveaway for playing "Flip My House" one last time. And today's amendment, which would guarantee a 4 to 4.5% mortgage rate, would be even stupider.
There were some victories on amendments, too. Jim DeMint tried to make the Bush tax cuts permanent and that went down. John Thune tried to make sure the bill wouldn't expand the scope of the federal government and that went down. And while the "Buy American" provision was altered it was not eliminated.
Senators, on a voice vote, approved an amendment requiring the Buy American provisions be "applied in a manner consistent with U.S. obligations under international agreements." [...]
Sen. John McCain, an Arizona Republican, urged the Senate to go further and specifically bar any Buy American provision as part of the stimulus package. But senators rejected his amendment by a vote of 65-31.
Free traders need to take a pill. Dean Baker dispatches with them so I don't have to.
The free trade crew tells us that this Buy America provision will start a trade war. Why would our trading partners start a trade war over a bill that increases demand for their exports?
That's right, the stimulus bill will increase demand for imports, including for imported steel. The bill will lead to more growth, which will increase demand for all products, including imported steel. That will be the case even if we have barriers that limit the use of imported steel for a small part of the stimulus. So, will our trading partners start a trade war because we are buying more of their products?
It is also worth comparing the protection that the "free traders" see compared to the protection that they don't see. The government has already provided $350 billion in subsidized loans to our banks through the Troubled Asset Relief Program (TARP). The Fed has provided hundreds of billions more.
For some reason, these massive government subsidies, which hugely advantage U.S. banks relative to their foreign counterparts, have gotten no attention whatsoever from the so-called "free traders." Every bad thing that they say about protection for steel can be said for protection for banks, but for some reason we haven't heard any complaints about the bank bailouts.
Advantaging the domestic housing industry and the domestic banking industry, fine. Advantaging domestic steel and iron? Protectionism! Doesn't make any sense.
Anyway, I'd love to see this nonsense come out in a House-Senate conference.