Crowd-Out

We know the tax cuts in the Obama plan, particularly the corporate tax cuts, are there to grab Republican support. The side effect is that they crowd out needed spending in the transportation sector. Elena Schor has the story from the mouth of Jim Oberstar, Chair of the House transporation panel.

We set forth this $85-billion initiative from our committee. It's been reduced in the final going. We expect that it'll come out somewhere around $63 billion, but $30 billion for highways.

The reason for the reduction in overall funding -- we took money out of Amtrak and out of aviation; we took money out of the Corps of Engineers, reduced the water infrastructure program, the drinking water and the wastewater treatment facilities and sewer lines, reduced that from $14 billion to roughly $9 billion -- was the tax cut initiative that had to be paid for in some way by keeping the entire package in the range of $850 billion.

But I'll say that our portion is the one that really creates the jobs. Our portion of it is the one that's going to put people to work because unlike anything else, these jobs can't be outsourced to Bangalore, India.

This is extremely depressing. Four years from now, 75 votes for the stimulus package will be a distant memory, but we may still have mass transit far behind that of Europe. I ask you which is more important.

Fortunately, some Senators are willing to fight for including more mass transit and rail funding.

First, at a Senate progressive media summit today, Senator Charles Schumer said that he was unhappy about the amount of stimulus money set aside for mass transit and rail. He indicated that several other Senators from highly urbanized states were also unhappy about this portion of the stimulus, and that when the legislation reached the Senate, they would be jointly pushing for an increase in money set aside for mass transit and rail. The current amount for mass transit and rail in the stimulus bill is only $10 billion.

Amy Klobuchar wants to increase the funding for broadband in the stimulus, and that the money would go to public/private partnerships instead of the telecoms who might hoard it. So that's also hopeful.

In one respect, letting Congress have their stamp on the bill by forcing the Obama Administration's hand on these various issues is good in that it reasserts Congressional authority (the fact that the markups have not yet been public is disturbing, however). However, let's be clear that Congress has priorities of their own that may not be in the national interest but in the interest of serving their districts, and this habit of bailing out every sector can have very negative consequences.

Boeing and Lockheed Martin have been “pouring money into a publicity campaign” and stepping up congressional lobbying efforts to maintain funding for the Air Force’s F-22 Raptor.

Their efforts appear to be paying off. 200 members of the House and 44 members of the Senate have signed letters to President Obama urging him to extend the $62 billion F-22 Raptor program. Currently, the Air Force has funds to purchase 183 of the stealth aircraft, “but the letter says, ‘We are convinced that this number is insufficient to meet potential threats.’” The members write further that the jobs at stake make the program, as Matthew Yglesias recently paraphrased, “too big to fail”:

The F-22 program annually provides over $12 billion of economic activity to the national economy. … If this certification is not provided, layoffs will begin as this critical supplier base shuts down. … Over 25,000 Americans work for the 1,000+ suppliers in 44 states that manufacture the F-22. Moreover, it is estimated that another 70,000 additional Americans indirectly owe their jobs to this program.

We don't need the F-22 program, and furthermore, we have to disassociate the desire to renew American manufacturing with the building of weapons of war. There are far more constructive and cost-effective pursuits that the US can be funding. But the F-22 makes lots of Congressional districts very happy, so despite Rahm Emanuel's signal that there will be deep spending cuts in the coming years, in practice that's a much harder sell on Capitol Hill.

Crowding out positive public spending is bad enough, but delaying the needed re-organization of the American economy for parochial reasons is terrible.