The Stimulus Bill Is Dead; Long Live the Stimulus Bill!

The Wash Post reports:

Senate Democratic leaders conceded yesterday that they do not have the votes to pass the stimulus bill as currently written and said that to gain bipartisan support, they will seek to cut provisions that would not provide an immediate boost to the economy.

The legislation represents the first major test for President Obama and an expanded Democratic Congress, both of which have made economic recovery the cornerstone of their new political mandate. The stimulus package has now tripled from its post-election estimate of about $300 billion, and in recent days lawmakers in both parties have grown wary of the swelling cost.

Read the details here. It's good that Congress will not be passing (for the second time in a few months!) the economic equivalent of The Patriot Act as quickly and uncritically as, well, The Patriot Act.

But here's the rub: Let's say the GOP succeeds in lopping off, in the Post's calculation, "as much as $200 billion." Given that the Senate version of the bill is coming in (for now) around $900 billion, that means they'll be pushing a $700 billion bill. The House passed an $819 billion bill. You do the normal legislative arithmetic and that means we're likely to end up with something costing $1 trillion by the time it hits President Obama's desk with a thud. All of this sort of wrangling is a classic Washington two-step: Propose something costing a bazillion dollars. Your opponent offers a "realistic" and "principled" objection and counters with something costing a bazillion dollars minus $X. You both agree, reluctantly of course, to something that ends up costing a bazillion dollars minus $X, plus $Y so that the price tag comes is lower than your original bid but higher than your opponent's. Net result: Taxpayers are still out close to a bazillion dollars.

Some obvious points: 1. We still need to have a national conversation (or something equally uplifting) regarding the need for "stimulus" in fighting recessions in general, much less this specific one. It's far from clear that so-called stimulus spending works, even during periods that couple recession and war. 2. We still need to de-couple longer-term spending projects such as infrastructure construction/innovation from any notion of economic policies that will have immediate impact. 3. We still need to digest that last turd of a massive injection of government money into our system, the monstrosity that created TARP, etc. 4. The states need to come to terms with the idea that they, not federal taxpayers, are responsible for their own budgets. As more states project massive budget deficits, state-level legislators are more and more trying to glom onto D.C. bucks as a way of not having to fundamentally restructure the stupid way most of them do business.

So, to sum up: It's great that the stimulus bill is stalled. But until it's as dead as Tom Daschle's cabinet dreams, it's only going to get worse.

Comments

[jsh]

How dare you question the ability of the govt to fix all our problems with more spending now that The Smart People are in charge.

The classic Washington two-step: its Change We Can Believe In.

[Lester Hunt]

I am thinking of what happened when TARP stalled momentarily: it turned into a Christmas tree of senseless waste.

[energized democrat]

this is horrible news. any cuts that the republicans make to this bill will surely come at the cost to the poor rustbelt cities like mine that absolutely need our new convention centers and bus terminals to grow to be competitive with the sun belt cities. we really need these projects and the ideological republicans are just interested in partisanship and politics which is a shame because the democrats are honestly and intelligently trying to help us in ways that expert economists agree with. we didnt elect a democratic majority because we wanted the republicans to make their free market ideology get in the way of our countrys recovery! now whose not being patriotic?

[Naga Sadow]

IN YOUR FACE, KEYNES!!! BOO-YA!!!

[Jesrad]

That would make for an interesting illustration of a prisoner's dilemma if a majority of lawmakers consider that their colleagues' pork will be the downfall of their own special "stimulus" provision, and end up voting against the whole thing for the sake of their own little part in it.

[Ken Shultz]

You can color me Austrian in regards to the benefit of government fighting the business cycle.

...but the Republicans' proposal to cut the corporate tax rate from 35% to 25% is right on the money.

If the cycle's about easy credit encouraging misinvestment in labor and other things, and climbing out of recession is about unwinding those bad investments, then nothing makes more sense than lowering the penalty on the proceeds of new investments.

They should cut the corporate tax rate regardless of what they do with the rest of he stimulus package, and they should make those cuts permanent, not just for a year, so that companies can make projections about their after tax profits into the foreseeable future.

It's the only sensible thing I've seen come out of this--that part of the Republican proposal makes so much sense, it's hard to believe it came out of Congress.

[Seer]

If this stalling means that the bill will actually be trimmed down, rather than trimmed up like a Christmas Tree, then that's a good sign.

[John]

The worst thing that can happen would be some sort of "bi-partisian compromise". All that would do is take away responsibility for this mess. The best thing would be for the government to do nothing. The second best thing would be for the bill to pass without a single Republican vote. That way one party will own full responsibility for the bill and its effects. If there is some kind of compromise, then both sides can avoid responsibility by pointing to the fact that the other side voted for the bill.

One side or another ought to be responsible for this. Who knows, maybe we all are wrong and spending a few trillion in our children and grand children's money is the way to go. If it is, then let the Dems take credit for it. Good for them. But if it is not the way to go, one party going down in flames for supporting it would in the long run be a very good thing.

[Tyler]

Listening to people argue that the federal government needs to step in to relieve state defecits is funny.

Funny and terrifying at the same time.

[P Brooks]

My favorite "compromise" of all time was federal deposit insurance. The numbers were, as I recall, 25k in the House Bill, and 40k in the Senate Bill. When the thing came back from Committee, they had "compromised" on 100k.

I can't wait to see what it takes to get everybody on the same team this time.

Bipartisan consensus makes my ass hurt.

[R C Dean]

they will seek to cut provisions that would not provide an immediate boost to the economy.

Wouldn't that reduce the bill to about 10% of its current size?

There is no reason to believe, of course, that the compromise on this bill won't look just like the compromise on TARP. In the real world, compromise means each side gives up something. In D.C., it means you buy off your opponents with more of other people's money.

[Warren]

So what, noo fucking ziti now?

[Episiarch]

Warren, I prefer rigatoni.

[Mad Max]

'The states need to come to terms with the idea that they, not federal taxpayers, are responsible for their own budgets.'

(a) There is a lot of overlap between state taxpayers and federal taxpayers. That is, just because the legislature of (say) California manages to get a bunch of 'free federal money,' it's the people of California (present and future) who will be paying for it via federal taxes - the state legislators will just hope the people will be too stupid to blame them (state legislators) for the pain, because at least the paid didn't come in the form of extra state taxes or fewer state benefits, for which state legislators would get direct accountability.

(b) Some states put more into the federal treasure than they get out of it, and some put less. But since it's hard to follow the pea under the cup, it's hard for the average citizen to know if he's in a state that's getting a net disadvantage or a net advantage.

(c) If a state wants to borrow its way out of a budget crisis, it generally needs voter approval for some kind of bond issue. The feds don't. So federal aid is a way for the states to get around their state constitutions' restrictions on government borrowing.

[BDB]

This is starting to look an awful lot like Clinton's first two years.

[Taktix?]

I fear momentary defeats like this do little to stop garbage like this. All this does is give political cover to opponents of the bill.

These opponents will tack on something to the final bill, then say "I opposed this, but since it looked like it would pass the second time around, so I wanted to make sure we got someting out of it."

Proponents get the bill passed, opponents get to look like the lone survivors at Thermopylae, and everybody wins.

Everybody except the American taxpayer, that is...

[Congress]

Bipartisan consensus makes my ass hurt.
P Brooks
Here, this might help.

[John]

"I fear momentary defeats like this do little to stop garbage like this. All this does is give political cover to opponents of the bill."

I fear you are right to. Right now the bill as the House passed it is about a nine on the horrible bill scale. What is likly to happen is the Republicans will shame the Democrats into making it a six or a seven. That way the Republicans can say "see we made the bill better, don't you love us" and the Dems can get their bill and neither side can be held accountable for a horrible bill. That is how Washington works so I will be surprised if it doesn't work that way now.

[Warty]

Negative: I clicked on Congress's link.
Positive: now I know what "toff" means.

IP ban plz?

[Silentz]

...will seek to cut provisions that would not provide an immediate boost to the economy.

So now they're admitting that there are provisions that would not boost the economy?

I call shenanigans on the whole thing. Someone get officer Barbrady. Everybody get your brooms.

[zero]

Rhode Island, coincidentally, is not too big to fail.

[Congress]

Sorry Warty,

The link was to the Relax anal spray product but apparently they re-direct.

[P Brooks]

The link was to the Relax anal spray product but apparently they re-direct.

Like that makes a difference.

You'll be receiving a sternly-worded letter from my attorneys!

[PapayaSF]

R C Dean: Yes, I read that the House bill only spends about 8% of the money this year.

Here's the Drudge headline of the moment: Nancy Pelosi claiming that we need the stimulus right away because every month we go without it, "500 million Americans lose their jobs."

[R C Dean]

Right now the bill as the House passed it is about a nine on the horrible bill scale. What is likly to happen is the Republicans will shame the Democrats into making it a six or a seven.

No, I would say that based on the TARP precedent, what is likely to happen is that the Senate Republicans will require that the bill be cranked to 11 on the horrible bill scale in order to hold all the pork needed to buy them off.

[stuartl]

We still need to de-couple longer-term spending projects such as infrastructure construction/innovation from any notion of economic policies that will have immediate impact.

Nick, if they are going to burn spend the money, shouldn't we at least get something for it? It might make the economy a little more efficient. Digging holes and filling them in isn't much use.

[John]

"No, I would say that based on the TARP precedent, what is likely to happen is that the Senate Republicans will require that the bill be cranked to 11 on the horrible bill scale in order to hold all the pork needed to buy them off."

maybe but a lot of the pork barons are gone or in jail or both. They could buy off Collins and one or two other RINOs but that is about it. I think that is what will end up happening. It will pass in a form just as bad or worse with one or two R votes as a fig leaf for Dems.

[Hal]

Some good points you laid out. I to think they need to decouple the infrastructure spending from the plan to rejuvenate the economy. Infrastructure is needed regardless of how things are economically. Fact is they really shouldn't be dabbling in saving the economy via more spending anyway.

If most sane common sense folk were presented with a friend who was say 18 thousand dollars in debt and unable to meet his monthly expenses like, netflix, cable, season ticket costs, etc., we wouldn't tell him to go out and get a personal loan and spend more money on a blue ray entertainment center and a sports car to get out of his problems. We'd tell him to work at cutting the luxuries, paying off debt, and saving.

That's what the government needs to do to. What it is doing is going to lead to inflation. I've been following the price of gold with the widget ExactPrice and I kind of get the feeling a fair number of investors are feeling the same way as gold is seeing some moves upward. I can only figure this is because so many are looking at it as a safe haven from the dollar which a number of economists like Sprott and Schiff are warning against.

Whatever happens I know that I'm going to work at saving and debt elimination.

[Gabe]

buy some physical silver too. 2008 was the first time we have ever seen a premium for physical silver prices over the futures price. now the futures price is almost backwardated. This can aonly happen when the market is getign fearful of a COMEX default, otherwise the forward price will be the a present pice plus storage costs plus opportunity costs of not earning interest.

The is a lot of paper silver out there that isn't neccesarily backed by real silver...100 ounces in your attic is a good insurance policy.

[R C Dean]

What it is doing is going to lead to inflation.

Was talking to some very smart guys at one of the few big banking/investment outfits that is doing well. They don't see inflation for another 18 months, figuring we are fighting deflation through this year and into next.

Apparently, the velocity of our money supply, as far as they can tell, is approaching zero on a macro scale. Which means, I think, that all the "stimulus" aimed at increasing the volume of the money supply is misdirected, and will ultimately do nothing but fuel inflation once the money supply starts moving again.

[Max]

There's definitely way too much pork in this bill. I think the republicans are doing the right thing by wanting to trim the bill down. Though we do need spending to revitalize the economy, it needs to be in the right places, like creating new jobs. There are some reports that even though he might need some bipartisan help he should stay close to his base to make sure he gets those votes. Here's the link I was talking about:

http://www.newsy.com/videos/obama_s_push_to_move_fast/

[joshua corning]

If we do not do something quick America will continue to lose 500 million jobs a month!!!

[Gabe]

did anyone see the john stewart clip where he was talking about what type of commercials were big for the Super Bowl this year? and he highlighted the "sell your spare gold/silver for cash" ads?

[cunnivore]

Here's the Drudge headline of the moment: Nancy Pelosi claiming that we need the stimulus right away because every month we go without it, "500 million Americans lose their jobs."

Maybe she's including the entire hemisphere.