Those in the Congress who are balking at the price tag of the stimulus package championed by President Barack Obama are setting the wrong standard. It is not the size of the bill that matters but what the nearly $1 trillion in federal spending would accomplish in terms of jumpstarting the economy.
A group of senators, including Susan Collins, negotiated a stimulus bill in the range of $827 billion, rather than the $900 billion put together by Senate Democrats. Their bill must be reconciled with the $819 billion version passed by the House of Representatives.
As that work proceeds, it is not the dollar amounts that matter as much as whether the funds are allocated to people and programs that will quickly get the money into the sagging economy. To make the Senate bill more palatable, for example, $40 billion less is allocated to state fiscal relief than under the House measure. Sending money to the states can avert layoffs and program cuts that will further weaken the economy.
“In particular, aid to state governments, which are in desperate straits, is both fast — because it prevents spending cuts rather than having to start up new projects — and effective, because it would in fact be spent,” New York Times columnist Paul Krugman wrote over the weekend. “Plus state and local governments are cutting back on essentials, so the social value of this spending would be high.”
The Senate bill has a higher price tag due mostly to a provision to fix the Alternative Minimum Tax, a necessary change but one slipped in the stimulus measure to hide its large cost. It also includes a $15,000 tax break for first-time homebuyers. Both are worthwhile, but don’t meet the “stimulate the economy” standard championed by Sen. Collins and others who are working to reduce the cost of the package.
Although the Senate bill is not perfect, Sens. Collins and Olympia Snowe deserve credit for moving the much needed measure forward, despite the chilly reception from many of their Republican colleagues. They, along with Sen. Arlen Specter of Pennsylvania, are the only Republicans who have cast votes in favor of the package.
Others in the GOP see the stimulus package as a way to score political points because much of the public opposes the massive government spending plan. This is unconscionable because, while the package will inevitably contain some pork, most economists agree that government spending is the only way out of the current recession. In fact, Mr. Krugman notes that the Congressional Budget Office projects that American output will drop by 14 percent of gross domestic product over the next two years. That’s a loss of around $2 trillion. Adding $800 billion to the economy is not enough, Mr. Krugman, an economist, writes.
Also, it is an odd time for Republicans to want to return to their fiscal conservative roots. Where were their concerns about the federal deficit and government spending when they unconditionally funded the wars in Iraq and Afghanistan, voted for massive tax cuts that primarily benefited the wealthy and oversaw the largest increases in the federal budget in decades?
Using federal funds to stimulate the economy is fiscally responsible, if the money is directed to where it will create jobs and encourage consumer spending.