Democrats, Leave Grease Out of the Stimulus Package

By John Aloysius Farrell, Thomas Jefferson Street blog

And so. It turns out that the House Republicans and conservative Democrats who claim that the proposed $800 billion stimulus package is significantly larded with long-term spending projects are correct.

After a week of disingenuous arguments by both House leaders and their critics, the non-partisan Congressional Budget Office has finally, publicly scored HR 1 and found that only 65 percent of the huge package of tax cuts and spending would be used to create jobs and otherwise lubricate the economy in the next 20 months.

The other 35 percent will no doubt be beneficial but doesn't really qualify as stimulus, and does not meet President Obama's goal that 75 percent of the package be targeted at creating new jobs and immediately revving the economy.

I am not a libertarian purist. I have covered the House of Representatives for many years, and extensively studied its ways and its history when writing a biography of Speaker Tip O'Neill.

I recognize that it is, in fact, one of the glories of our democracy that the leaders of the people's house generally need to grease a fair number of palms (figuratively speaking) from all ideological camps and regions of the nation to assemble a sturdy majority for a package this big.

The questions before us are two: Is 35 percent worth of grease too high a price for the good that will be done by the other 65 percent? Are liberal Democrats straying immediately from the spirit of openness and responsibility promised by the new president and cynically pushing projects that would not otherwise get approved? I find the Democrats guilty on both counts.

How many jobs were lost yesterday? 65,000? 80,000? How many headlines like those in this morning's papers do the House Dems need to see before they get the message that this is not a time for business as usual?

The White House gets it. I was puzzled when Joe Biden used his speech at the pre-inauguration concert 10 days ago to talk about jobs, jobs, jobs. It seemed jarring, and out of place with the glory of the music, the magic of the moment, and the beauty of the setting. After reading today's headlines, I'm not so puzzled anymore.

The Woody Guthrie tribute by Bruce Springsteen and (God bless him) an exuberant Pete Seeger seems a lot more relevant too.

Everyone likes building infrastructure. So let's hash it out this summer and pass a huge, separate roads and transit bill, funded by the federal gas tax. Then we'll have something to show for the spending. But as stimulus, the problem with big construction projects is that they take so darn long to get moving.

And let it be noted: The CBO report specifically refuted the House Democratic leadership's assertion that there are plenty of on-the-shelf projects that can instantly be launched.

"The most effective types of short-term fiscal stimulus ... are those that direct money to people who are most likely to quickly spend the bulk of any additional funds," writes CBO Director Douglas W. Elmendorf. That means tax cuts or increased spending on unemployment, food stamps, and other transfer payments.

Most of us lived through the Bush I and Clinton years, and so remember how the flat jobs reports and "huge" deficits of the Reagan era so quickly disappeared once the economy got roaring during the tech boom of the 1990s.

As I have argued here before, the central imperative for Congress today is to juice that incredible American job-and-profit-making machine once again. Once we do, we'll have money for the arts, or light rail, or to cut tax rates and pay down the debt.

As for me, I'm no economist. But I still like the idea of creating a big, long withholding holiday for the Social Security payroll tax. That's right: Let's give American workers a raise.

A payroll tax holiday could give self-employed stiffs (like myself) a tax break, while at the same time giving salaried workers (like my wife) a fatter take-home check.

I was originally intrigued by the House Republican idea of cutting the payroll tax for both employers and employees, thinking bosses would keep workers on the job, but the CBO studied the idea and concluded that "applying a holiday to the employer side of the payroll tax is unlikely to be cost effective."

What is so great about a withholding holiday?

There is evidence, the CBO reports, that a hike in take-home pay will have a greater psychological impact on consumers than a tax rebate or a long-term tax cut, and make us more likely to spend the money instead of stuffing it in the mattress.

Banks. Government. Consumers. We gotta start handing money to each other again, folks, and the sooner the better.

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