Economics

$800 Billion or $1.7 Trillion?

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The easy shorthand for the "American Reinvestment and Recovery Act" worked out by Congress and headed for President Obama's desk is to say it's an $800 billion pile of hot steaming stimulus (well, $789 billion, to be inexact). But it may end up costing $1.7 trillion over the course of its lifetime. Why? USA Today notes:

These increases are supposed to be only for a limited period, generally this year and next. In budget-speak, however, they raise the "baseline" amounts allocated for these programs. Any attempt to bring the new baselines back down to pre-stimulus levels will undoubtedly be greeted with howls about "cuts" that would hurt the poor, the infirm, students, researchers and police. (Already, some House Democrats are complaining about "cuts" made in the pie-in-the-sky levels of spending contained in their original version of the stimulus bill.)…

If 30 tax breaks and spending increases in the House stimulus bill were extended—and each one has its own constituency and lobbyists—the Congressional Budget Office estimates that would add $1.7 trillion to federal deficits over 10 years.

More here.

And a note about those "tax breaks": As Reason columnist Veronique de Rugy has pointed out, most of them are refundable credits or give-backs rather than actual cuts in rates. That is, you pays your taxes and then get a check back from the government later on when you eventually file your returns. Which not only makes them less useful as "stimulus," it also makes them virtually indistinguishable from spending programs.

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  1. Right, just like the Bush Corporate Welfare Medicare Pharma Bill costs $14 trillion over the next 20 years and could never be snatched away from the pig trough now that it firmly in place.

    So everyone becomes a budget actuary in a fiscal crisis?

    So private capital has shrunk by $20 trillion in the last two years and government is growing to replace it? Whoever could have seen this coming?

    Why didn’t the moron read the PDB?

    (all rhetorical, of course)

  2. I guess the only question left is will there be enough ink?

  3. “I guess the only question left is will there be enough ink?”

    Black or red?

    We’ll soon be drowning in red ink…but apparently thats still not enough for Dear Leader.

  4. We’ll need more green and black ink for the money they’re printing.

    Maude: Lord. You can imagine where it goes from here.
    The Dude: He fixes the cable?
    Maude Lebowski: Don’t be fatuous, Jeffrey.

  5. That is, you pays your taxes and then get a check back from the government

    That should be “…gets a check…”

  6. Once upon a time conservatives used to champion the EITC.

    (Not saying Ms de Rugy is a conservative, just that her first two items in section 3 are straight out of Hannity’s talking points. Otoh, the municipal bond incentive is pretty much ‘a tax cut for the rich’)

  7. I’m actually kind of looking forward to the day when we can open a history book and it will refer to the period from 1992 to 2012 as the Big Mistake period, when Americans elected Clinton, Bush, and Obama in succession, delivering wave after wave of damage to the nation’s finances and equal protection of the law, ultimately subjecting the nation to enslavement by debt and rising totalitarianism. This period ends in 2012 when the country elects Sarah Palin president on a racist and xenophobic platform, initiating end times.

  8. Kolohe,

    Friedman was a big proponent of the negative income tax, which the EITC is a poor example of.

    A flax tax with a negative income tax component is better than our current tax system, even if it isnt perfect. Of course, the Friedman version also ends welfare as part of the plan.

  9. When I said 2012 I meant 2016. No way anyone will defeat Barack in 2012.

  10. robc,

    Just to be clear, Friedman’s NIT had the government providing transfer payments to individuals below the poverty line, who would pay no taxes at all, right? They still have to work, but I assume you’d have to do at most 20 hours a week right?

    So that’s pretty much welfare, but I have no problem with it, especially if it was paired with the “tax return on a postcard” idea.

  11. Shrike:

    Amigo you really do need another hit. Your just too brillant! I mean we need you at every tv event to announce your4 support of your candidates.

    You need to plaster your face all over tv.

    But first take off that odd jacket and tell your minders that you will stop howling at the moon.

    Try mixing your coke with your lithium amigo, it will keep you in that heavenly state you’re in now for days. And they won’t notice it during your shift at Bob’s Big Boy.

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