Stimulus Bill Update

Update: President Obama signed HR-1 on Tuesday in Denver, CO.

This week, Congress moved post-haste both in conference committee and in each chamber to give President Obama a $787 billion economic stimulus bill developed almost exclusively by the Democratic party. Thus does life inside the Beltway repeat itself when Congress and the White House is controlled by the same party.

The party line vote on the conference report for HR1: in the Senate, 60-38; in the House of Representatives, 246-183. See who voted "against" their party.

According to the non-partisan Congressional Budget Office, HR1 will increase the national debt by $184.9 billion in fiscal 2009 and $399.4 billion in fiscal 2010. The increase in national debt is inevitable because "pay as you go" principles do not apply: Congress has declared all expenditures and tax relief measures to be "emergency" in nature.

Earlier projections by CBO suggested that without a stimulus plan, unemployment for 2009 would be 9.0%; 2010, 8.7%; and 2011, 7.5%. Note that the projection for job loss without federal government intervention is far below the 10.8% unemployment rate of the Reagan recession, when unemployment peaked in 1982; that recession was also marked by double-digit interest rates. The CBO forecast also projects that the economy would begin recovery in 2010 without a fiscal stimulus.

The rhetoric from Washington may be more important than the actual bill, however. Some analysts have suggested that former Treasury Secretary Paulson panicked citizens and markets last fall, contributing to a loss of confidence in the economy. Senate Appropriations Committee Chairman Daniel Inouye (D-HI) tacitly acknowledged this analysis when he said that HR1 "will give America confidence that we can overcome this crisis."

What Does The Bill Contain?
The 1,071-page American Recovery and Reinvestment Act (H.R. 1: pdf - part 1, pdf - part 2) was accompanied by a 781-page explanatory statement from the conference committee (pdf - part 1, pdf - part 2). Based on news reports, here are some bill highlights:

• Social program expenditures include $1.5 billion for homelessness prevention and $87 billion for Medicaid. There is $20 billion for food stamp benefits; $4 billion for state and local law enforcement agencies; and $4 billion to help train unemployed workers.
• There a one-time $250 payment for senior citizens, disabled veterans and disabled people living on Social Security benefits.
• Big winner: the National Institutes of Health has $10 billion in the final bill, with $8.2 billion at the discretion of the director.
• Someone in your family attending college? Individuals making less than $80,000 or families making less than $160,000 are eligible for up to $2,500 in tax credits for college tuition with 40 percent ($1,000) of the credit being refundable. Estimated cost: $13.9 billion over 10 years. And Pell grants will increase to a maximum of $5,350 per student in 2009-2010 year. For the first time, college-related book and computer purchases are eligible for an income tax write-off.
• Almost anyone who buys a new car in 2009 will be able to deduct the sales tax from income tax without the requirement to itemize deductions. Individuals must make less than $125,000; couples less than $250,000 jointly. Estimated cost is $1.7 billion.
• A first-time homebuyer (anyone who has not owned a home in the past three years) who purchases a home this calendar year gets an $8,000 tax credit. Unlike a 2008 measure ($7,500), this one does not have to be repaid. Like most of the tax cuts, this one phases out for individuals making more than $75,000 or for those making $150,000 jointly. Estimated cost: $6.63 billion.
• A refundable tax credit of up to $400 per individual and $800 for couples in 2009 and 2010. Like prior income tax rebates, this one is phased out for individuals with adjusted incomes of over $75,000 and couples with incomes over $150,000.
• Almost $54 billion for states, for education-related budget deficit reduction and school modernization.
• Infrastructure projects include $27.5 billion for highway projects, $8.4 billion for public transportation and $9.3 billion for Amtrak and high-speed rail service.

Non-Emergency Components
Critics will argue that many of the above expenditures are non-emergency in nature. These three are clearly non-emergency:

• A controversial “Buy American” provision for material used in construction projects was modified, after protests from trading partners, to acknowledge that implementation rules must conform with international trade agreements.
• The bill contains limits on compensation for senior executives of financial companies receiving government aid as well as new rules for those firms when they hire foreign workers under the H-1B visa program.
• More than 24 million households will be sparred an inflation-delivered whammy called the alternative-minimum tax; estimated cost: $70 billion. Rather than exempt individuals on an ad hoc basis, it's past time for Congress to reform the law.

What Was Left Out

• Language for whistleblower protection.
• Military construction was reduced to $1.45 billion for all services, less than half of the House proposal.

Bill History
It's also important to note the Democrats have been pushing for an economic stimulus since 2008. For example, last June Democrats secured a 13-week extension of jobless benefits as part of additional war funding for Iraq and Afghanistan. Those extended benefits were both retroactive and proactive, targeting workers who exhausted unemployment benefits between November 2006 and March 2009.

Procedurally, the Senate needed 60 vote to pass H.R. 1 because the bill was subject to a budget point of order, due to the waiver of pay-as-you-go. To get those votes, the Senate held the vote open for hours, and the White House dispatched a government plane to fly Sen. Sherrod Brown (D-OH) round-trip from Ohio to cast a vote. Brown was at home for his mother's funeral (scheduled for today).

Why did both chambers want to wrap this up on Friday? Because Monday is a national holiday and the Congress is not in session again until 23 February.

Who Voted Against Their Party?
In the House, seven Democrats voted "no" : Bright, DeFazio, Griffith, Minnick, Peterson, Shuler and Taylor. Lipinski, a Democrat, voted "present." Three Representatives did not vote: Campbell (R), Clyburn (D) and Lee (R-NY). No Republicans voted "yes."

In the Senate, no Democrats voted "no." Four non-Democrats voted "yes" : Collins (R-ME), Sanders (I-VT), Snowe (R-ME) and Specter (R-PA). Not voting: Kennedy (D-MA).