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50 De-Stimulating Facts by Stephen Spruiell & Kevin Williamson on National Review Online.


50 De-Stimulating Facts

Chapter and verse on a bad bill.

By Stephen Spruiell & Kevin Williamson

Senate Democrats acknowledged Wednesday that they do not have the votes to pass the stimulus bill in its current form. This is unexpected good news. The House passed the stimulus package with zero Republican votes (and even a few Democratic defections), but few expected Senate Republicans (of whom there are only 41) to present a unified front. A few moderate Democrats have reportedly joined them.

The idea that the government can spend the economy out of a recession is highly questionable, and even with Senate moderates pushing for changes, the current package is unlikely to see much improvement. Nevertheless, this presents an opportunity to remove some of the most egregious spending, to shrink some programs, and to add guidelines where the initial bill called for a blank check. Here are 50 of the most outrageous items in the stimulus package:


VARIOUS LEFT-WINGERY
The easiest targets in the stimulus bill are the ones that were clearly thrown in as a sop to one liberal cause or another, even though the proposed spending would have little to no stimulative effect. The National Endowment for the Arts, for example, is in line for $50 million, increasing its total budget by a third. The unemployed can fill their days attending abstract-film festivals and sitar concerts.

Then there are the usual welfare-expansion programs that sound nice but repeatedly fail cost-benefit analyses. The bill provides $380 million to set up a rainy-day fund for a nutrition program that serves low-income women and children, and $300 million for grants to combat violence against women. Laudable goals, perhaps, but where’s the economic stimulus? And the bill would double the amount spent on federal child-care subsidies. Brian Riedl, a budget expert with the Heritage Foundation, quips, “Maybe it’s to help future Obama cabinet secretaries, so that they don’t have to pay taxes on their nannies.”

Perhaps spending $6 billion on university building projects will put some unemployed construction workers to work, but how does a $15 billion expansion of the Pell Grant program meet the standard of “temporary, timely, and targeted”? Another provision would allocate an extra $1.2 billion to a “youth” summer-jobs program—and increase the age-eligibility limit from 21 to 24. Federal job-training programs—despite a long track record of failure—come in for $4 billion total in additional funding through the stimulus.

Of course, it wouldn’t be a liberal wish list if it didn’t include something for ACORN, and sure enough, there is $5.2 billion for community-development block grants and “neighborhood stabilization activities,” which ACORN is eligible to apply for. Finally, the bill allocates $650 million for activities related to the switch from analog to digital TV, including $90 million to educate “vulnerable populations” that they need to go out and get their converter boxes or lose their TV signals. Obviously, this is stimulative stuff: Any economist will tell you that you can’t get higher productivity and economic growth without access to reruns of Family Feud.

Summary:
$50 million for the National Endowment for the Arts
$380 million in the Senate bill for the Women, Infants and Children program
$300 million for grants to combat violence against women
$2 billion for federal child-care block grants
$6 billion for university building projects
$15 billion for boosting Pell Grant college scholarships
$4 billion for job-training programs, including $1.2 billion for “youths” up to the age of 24
$1 billion for community-development block grants
$4.2 billion for “neighborhood stabilization activities”
$650 million for digital-TV coupons; $90 million to educate “vulnerable populations”



POORLY DESIGNED TAX RELIEF
The stimulus package’s tax provisions are poorly designed and should be replaced with something closer to what the Republican Study Committee in the House has proposed. Obama would extend some of the business tax credits included in the stimulus bill Congress passed about a year ago, and this is good as far as it goes. The RSC plan, however, also calls for a cut in the corporate-tax rate that could be expected to boost wages, lower prices, and increase profits, stimulating economic activity across the board.

The RSC plan also calls for a 5 percent across-the-board income-tax cut, which would increase productivity by providing additional incentives to save, work, and invest. An across-the-board payroll-tax cut might make even more sense, especially for low- to middle-income workers who don’t make enough to pay income taxes. Obama’s “Making Work Pay” tax credit is aimed at helping these workers, but it uses a rebate check instead of a rate cut. Rebate checks are not effective stimulus, as we discovered last spring: They might boost consumption, a little, but that’s all they do.

Finally, the RSC proposal provides direct tax relief to strapped families by expanding the child tax credit, reducing taxes on parents’ investment in the next generation of taxpayers. Obama’s expansion of the child tax credit is not nearly as ambitious. Overall, his plan adds up to a lot of forgone revenue without much stimulus to show for it. Senators should push for the tax relief to be better designed.

Summary:
$15 billion for business-loss carry-backs
$145 billion for “Making Work Pay” tax credits
$83 billion for the earned income credit


STIMULUS FOR THE GOVERNMENT

Even as their budgets were growing robustly during the Bush administration, many federal agencies couldn’t find the money to keep up with repairs—at least that’s the conclusion one is forced to draw from looking at the stimulus bill. Apparently the entire capital is a shambles. Congress has already removed $200 million to fix up the National Mall after word of that provision leaked out and attracted scorn. But one fixture of the mall—the Smithsonian—dodged the ax: It’s slated to receive $150 million for renovations.

The stimulus package is packed with approximately $7 billion worth of federal building projects, including $34 million to fix up the Commerce Department, $500 million for improvements to National Institutes of Health facilities, and $44 million for repairs at the Department of Agriculture. The Agriculture Department would also get $350 million for new computers—the better to calculate all the new farm subsidies in the bill (see “Pure pork” below).

One theme in this bill is superfluous spending items coated with green sugar to make them more palatable. Both NASA and NOAA come in for appropriations that properly belong in the regular budget, but this spending apparently qualifies for the stimulus bill because part of the money from each allocation is reserved for climate-change research. For instance, the bill grants NASA $450 million, but it states that the agency must spend at least $200 million on “climate-research missions,” which raises the question: Is there global warming in space?

The bottom line is that there is a way to fund government agencies, and that is the federal budget, not an “emergency” stimulus package. As Riedl puts it, “Amount allocated to the Census Bureau? $1 billion. Jobs created? None.”

Summary:
$150 million for the Smithsonian
$34 million to renovate the Department of Commerce headquarters
$500 million for improvement projects for National Institutes of Health facilities
$44 million for repairs to Department of Agriculture headquarters
$350 million for Agriculture Department computers
$88 million to help move the Public Health Service into a new building
$448 million for constructing a new Homeland Security Department headquarters
$600 million to convert the federal auto fleet to hybrids
$450 million for NASA (carve-out for “climate-research missions”)
$600 million for NOAA (carve-out for “climate modeling”)
$1 billion for the Census Bureau


INCOME TRANSFERS

A big chunk of the stimulus package is designed not to create wealth but to spread it around. It contains $89 billion in Medicaid extensions and $36 billion in expanded unemployment benefits—and this is in addition to the state-budget bailout (see “Rewarding state irresponsibility” below).

The Medicaid extension is structured as a temporary increase in the federal match, but make no mistake: Like many spending increases in the stimulus package, this one has a good chance of becoming permanent. As for extending unemployment benefits through the downturn, it might be a good idea for other reasons, but it wouldn’t stimulate economic growth: It would provide an incentive for job-seekers to delay reentry into the workforce.

Summary:
$89 billion for Medicaid
$30 billion for COBRA insurance extension
$36 billion for expanded unemployment benefits
$20 billion for food stamps


PURE PORK
The problem with trying to spend $1 trillion quickly is that you end up wasting a lot of it. Take, for instance, the proposed $4.5 billion addition to the U.S. Army Corps of Engineers budget. Not only does this effectively double the Corps’ budget overnight, but it adds to the Corps’ $3.2 billion unobligated balance—money that has been appropriated, but that the Corps has not yet figured out how to spend. Keep in mind, this is an agency that is often criticized for wasting taxpayers’ money. “They cannot spend that money wisely,” says Steve Ellis of Taxpayers for Common Sense. “I don’t even think they can spend that much money unwisely.”

Speaking of spending money unwisely, the stimulus bill adds another $850 million for Amtrak, the railroad that can’t turn a profit. There’s also $1.7 billion for “critical deferred maintenance needs” in the National Park System, and $55 million for the preservation of historic landmarks. Also, the U.S. Coast Guard needs $87 million for a polar icebreaking ship—maybe global warming isn’t working fast enough.

It should come as no surprise that rural communities—those parts of the nation that were hardest hit by rampant real-estate speculation and the collapse of the investment-banking industry—are in dire need of an additional $7.6 billion for “advancement programs.” Congress passed a $300 billion farm bill last year, but apparently that wasn’t enough. This bill provides additional subsidies for farmers, including $150 million for producers of livestock, honeybees, and farm-raised fish.

Summary:
$4.5 billion for U.S. Army Corps of Engineers
$850 million for Amtrak
$87 million for a polar icebreaking ship
$1.7 billion for the National Park System
$55 million for Historic Preservation Fund
$7.6 billion for “rural community advancement programs”
$150 million for agricultural-commodity purchases
$150 million for “producers of livestock, honeybees, and farm-raised fish”


RENEWABLE WASTE

Open up the section of the stimulus devoted to renewable energy and what you find is anti-stimulus: billions of dollars allocated to money-losing technologies that have not proven cost-efficient despite decades of government support. “Green energy” is not a new idea, Riedl points out. The government has poured billions into loan-guarantees and subsidies and has even mandated the use of ethanol in gasoline, to no avail. “It is the triumph of hope over experience,” he says, “to think that the next $20 billion will magically transform the economy.”

Many of the renewable-energy projects in the stimulus bill are duplicative. It sets aside $3.5 billion for energy efficiency and conservation block grants, and $3.4 billion for the State Energy Program. What’s the difference? Well, energy efficiency and conservation block grants “assist eligible entities in implementing energy efficiency and conservation strategies,” while the State Energy Program “provides funding to states to design and carry out their own energy efficiency and renewable energy programs.”

While some programs would spend lavishly on technologies that are proven failures, others would spend too little to make a difference. The stimulus would spend $4.5 billion to modernize the nation’s electricity grid. But as Robert Samuelson has pointed out, “An industry study in 2004—surely outdated—put the price tag of modernizing the grid at $165 billion.” Most important, the stimulus bill is not the place to make these changes. There is a regular authorization process for energy spending; Obama is just trying to take a shortcut around it.

Summary:
$2 billion for renewable-energy research ($400 million for global-warming research)
$2 billion for a “clean coal” power plant in Illinois
$6.2 billion for the Weatherization Assistance Program
$3.5 billion for energy-efficiency and conservation block grants
$3.4 billion for the State Energy Program
$200 million for state and local electric-transport projects
$300 million for energy-efficient-appliance rebate programs
$400 million for hybrid cars for state and local governments
$1 billion for the manufacturing of advanced batteries
$1.5 billion for green-technology loan guarantees
$8 billion for innovative-technology loan-guarantee program
$2.4 billion for carbon-capture demonstration projects
$4.5 billion for electricity grid


REWARDING STATE IRRESPONSIBILITY

One of the ugliest aspects of the stimulus package is a bailout for spendthrift state legislatures. Remember the old fable about the ant and the grasshopper? In Aesop’s version, the happy-go-lucky grasshopper realizes the error of his ways when winter comes and he goes hungry while the industrious ant lives on his stores. In Obama’s version, the federal government levies a tax on the ant and redistributes his wealth to the party-hearty grasshopper, who just happens to belong to a government-employees’ union. This happens through something called the “State Fiscal Stabilization Fund,” by which taxpayers in the states that have exercised financial discipline are raided to subsidize Democratic-leaning Electoral College powerhouses—e.g., California—that have spent their way into big trouble.

The state-bailout fund has a built-in provision to channel the money to the Democrats’ most reliable group of campaign donors: the teachers’ unions. The current bill requires that a fixed percentage of the bailout money go toward ensuring that school budgets are not reduced below 2006 levels. Given that the fastest-growing segment of public-school expense is administrators’ salaries—not teachers’ pay, not direct spending on classroom learning—this is a requirement that has almost nothing to do with ensuring high-quality education and everything to do with ensuring that the school bureaucracy continues to be a cash cow for Democrats.

Setting aside this obvious sop to Democratic constituencies, the State Fiscal Stabilization Fund is problematic in that it creates a moral hazard by punishing the thrifty to subsidize the extravagant. California, which has suffered the fiscal one-two punch of a liberal, populist Republican governor and a spendthrift Democratic legislature, is in the worst shape, but even this fiduciary felon would have only to scale back spending to Gray Davis–era levels to eliminate its looming deficit. (The Davis years are not remembered as being especially austere.) Pennsylvania is looking to offload much of its bloated corrections-system budget onto Uncle Sam in order to shunt funds to Gov. Ed Rendell’s allies at the county-government level, who will use that largesse to put off making hard budgetary calls and necessary reforms. Alaska is looking for a billion bucks, including $630 million for transportation projects—not a great sign for the state that brought us the “Bridge to Nowhere” fiasco.

Other features leap out: Of the $4 billion set aside for the Community Oriented Policing Services—COPS—program, half is allocated for communities of fewer than 150,000 people. That’s $2 billion to fight nonexistent crime waves in places like Frog Suck, Wyo., and Hoople, N.D.

The great French economist Frédéric Bastiat called politics “the great fiction through which everybody endeavors to live at the expense of everybody else.” But who pays for the state bailout? Savers will pay to bail out spenders, and future generations will pay to bail out the undisciplined present.

In sum, this is an $80 billion boondoggle that is going to reward the irresponsible and help state governments evade a needed reordering of their financial priorities. And the money has to come from somewhere: At best, we’re just shifting money around from jurisdiction to jurisdiction, robbing a relatively prudent Cheyenne to pay an incontinent Albany. If we want more ants and fewer grasshoppers, let the prodigal governors get a little hungry.

Summary:
$79 billion for State Fiscal Stabilization Fund

Stephen Spruiell is a staff reporter for National Review Online. Kevin Williamson is a deputy managing editor of National Review.


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