Economy: In the aftermath of the largest spending bill in U.S. history, even experts are struggling to understand the details: “It’s chaos” | Jamie Dean
Illustration by Krieg Barrie
Visit President Barack Obama’s still-functioning campaign website, and you’ll find a list of pre-election promises. A prominent one: “Obama and Biden will stop funding wasteful, obsolete government programs that make no financial sense.” Another: “Obama and Biden believe that a critical step in restoring fiscal discipline is enforcing pay-as-you-go budgeting rules.”
But as Congress headed into negotiations over a nearly $800 billion economic stimulus bill, pay-as-you-go notions evaporated. Brian Riedl of the Heritage Foundation put it simply: “Congress does not have a vault of money to pump into the economy.” Instead, Congress will borrow the funds, adding to an already $1.2 trillion deficit projected for this fiscal year.
The president insists massive spending is a necessary triage for a spiraling financial crisis, but Riedl and other economic analysts questioned the urgency: for example, $650 million for the government’s campaign to prepare Americans for the analog-to-digital television transition in June. (The government has already spent $1.3 billion on the project.) Other examples: $1 billion for the 2010 census, $300 million to combat domestic violence, $158 million for national parks operations, $100 million for a lead-reduction program in low-income housing, and $25 million for substance abuse programs on Indian reservations.
These may be worthy programs, but analysts like Riedl say they are less about stimulating the economy and more about enacting an agenda: “Congress has dusted off their long-term spending wish list and written the world ‘stimulus’ on top of it.”
With about 70 percent of the stimulus bill devoted to spending, examining the contents of the measure is instructive. The first major legislation of the new Congress and new administration offers a telling preview of the priorities and plans that lie ahead:
Obama promised big spending for federal programs during his campaign, and he began delivering in the stimulus bill. Among the biggest line items:
Health care: The House-approved version of the bill devotes nearly $90 billion to increases in Medicaid, representing one of the largest spending items in the bill. The measure included another $40 billion for health insurance assistance for the unemployed, funding up to 65 percent of workers’ COBRA bills. (The Senate-approved version of the bill funded half.) The House slated another $20 billion for Health and Human Services and created a 15-member federal health board that would research costs of care and medicine to determine which treatments the federal government would pay for. That means federal employees could cut certain treatments for patients relying on federal health care.
Education: The House approved as much as $66 billion for education, including renovations for elementary and secondary schools, and another $79 billion in state grants for education and other needs. A murky process for awarding education grants could mean that already well-funded school districts receive an influx of cash. For example, The Milwaukee Journal Sentinel reported that officials in the city’s public school system say most school facilities are in “good-to-better-than-good condition.” The system has 15 vacant buildings and declining enrollment but could receive $88 million for new construction under the stimulus.
Energy: The House bill devoted $48 billion to energy-related projects, including a host of programs aimed at developing renewable energy and modernizing the nation’s electrical grid system. But Dana Joel Gattuso of the National Center for Public Policy Research says so-called green programs represent long-term projects rather than emergency stimulus. Gattuso points out that Congress has already spent billions on renewable energy with minimal results, and that creating jobs in renewable energy programs would take years. Michael Moynihan, director of the Green Project in Washington, D.C., told The Los Angeles Times that job creation from modernizing the electrical grid wouldn’t come quickly either, since designs for the massive project don’t exist: “Before you spend billions of dollars on new lines, you have to spend billions of dollars on design work.”
Other: Democrats say more than 30 percent of the stimulus package represents tax cuts, though the Congressional Budget Office counted nearly $100 billion of those purported cuts as spending. The reason: The credits would go to people who don’t pay taxes.
Riedl of the Heritage Foundation thinks the tax cuts might not be effective, saying many people may not save or invest $400 to $800 in tax credits. He favored a Republican-sponsored plan to cut individual and corporate tax rates, saying such cuts would be more stimulative for the economy.
The House plan also provided as much as $47 billion for transportation infrastructure projects. That figure represented less than some analysts expected for such projects.
With billions in spending, Riedl summarized what he called the bill’s flawed philosophy: “The bigger the government, the faster the economy grows,” and said debt-based decisions could be detrimental to the economy. Republican Gov. Mark Sanford of South Carolina bucked the trend of local governments clamoring for federal funds and told CNN: “We’re moving precipitously close to what I would call a savior-based economy.”
As Congress worked to dole out money, it also worked to attach restrictions to funding. Among the most alarming: a provision restricting religious groups from worshipping in college or university buildings repaired with stimulus funds. The provision also banned “sectarian instruction” in such facilities, as well as classes related to schools or departments of divinity.
Sen. Jim DeMint, R-S.C., introduced an amendment to drop the prohibition, saying: “This language is so vague, it’s not clear if students can even pray in a dorm room renovated with this funding since that is a form of religious worship.” The Senate defeated DeMint’s amendment but later dropped the entire funding section from the bill. The language remained in the House version as the bill went to the final negotiation process.
DeMint spokesman Wesley Denton said the prohibition was disturbing whether it remained in the final bill or not and said the original passage represented “an attack on people of faith.” He worries that Congress may try to slip similar provisions into future bills.
Kevin Hasson of the Becket Fund said the prohibition likely wouldn’t stand in court and pointed to equal-access laws that allow churches and religious groups to meet in government buildings. Still, he said, “This is the first thing out of the box for the Obama administration, and they’re groping for some way to reign in religion on college campuses. That’s troubling.”
Also troubling: funding restrictions on private schools. Both versions of the bill prohibited stimulus funds from going to private schools, even if families use government vouchers to pay for such schools. (The Senate version made exceptions for schools serving special needs students.)
If you express confusion over the stimulus process to David Williams of Citizens Against Government Waste, he’ll make a confession: “I’m just as confused as you.” Since the stimulus bill isn’t a regular spending measure, the process for developing it is murky, he says: “It’s chaos.” And since the plan includes pots of money for unspecified projects—including projects that don’t yet exist—it’s unclear how Congress will dole out cash.
Williams scoffs at Obama’s contention that the stimulus package doesn’t contain “a single pet project” or “a single earmark.” Williams says projects like the digital television transition might not technically qualify as earmarks because of the nature of the bill, but they still represent wasteful spending. And he says legislators will essentially earmark funds for projects as they distribute grants later: “The truth of it is, this is business as usual.”