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Partisan Stimulus Bill A Wasteful Hodgepodge Of Liberal Spending

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Location: Washington, DC

Partisan Stimulus Bill A Wasteful Hodgepodge Of Liberal Spending

Sen. Orrin Hatch (R-Utah) today took aim at the American Recovery and Reinvestment Act of 2009, saying the stimulus package is missing the mark at putting the nation on the road to economic recovery.

"The stimulus is a hodgepodge of liberal-targeted spending projects with a few decent ideas thrown in to try to appease Republicans . . . ," Hatch said today on the Senate floor. "A large fraction of the proposed stimulus package is devoted to infrastructure projects that would spend out very slowly, not with the speed needed to put the economy on the path to recovery in 2009 and 2010. While some of these public jobs are necessary, we also must provide incentives for private sector jobs. Furthermore, the stimulus needs to take effect immediately and not continue to provide a stimulus once the economy has turned around."

Hatch said the bill must be a bipartisan effort that addresses the housing crisis that is at the root of the problem. In its current form, he said, the legislation would spend too much on programs that would do too little to stop or reverse the economy's downward spiral.

"When interest is included," the senator added, "the $888 billion Senate version reaches almost $1.2 trillion. That is enough to give every man, woman and child in America $4,000, or every person in Utah $480,000. Indeed, $1.2 trillion is more than the cost of the New Deal and the Iraq War combined. The interest alone will be costlier than the Louisiana Purchase or going to the moon, adjusted for inflation."

Sen. Hatch's complete remarks on the Senate floor follow:

Mr. President, I rise today to express concern about the misguided direction we are headed toward in stimulating our economy. Our new President recently told the Washington Post, "The tone I set is that we bring as much intellectual firepower to a problem, that people act respectfully towards each other, that disagreements are fully aired, and that we make decisions based on facts and evidence as opposed to ideology, that people will adapt to that culture and we'll be able to move together effectively as a team."

To me, that means we must do what is necessary and will be effective, and I could not agree more with President Obama's statement. Unfortunately, in this bill, my friends on the other side of the aisle have not followed the President's leadership at a time when leadership is critical.

There is no doubt we are in a serious recession. There is widespread agreement that quick action is necessary to stop our economy's downward spiral. The facts are conclusive, and Democrats and Republicans all agree that economic conditions are severe. Both commonly acceptable definitions of a recession have clearly been met, and we have seen a constant decline for all economic indicators.

The Gross Domestic Product declined at a 3.8 percent annualized rate in the fourth quarter of 2008. The unemployment rate is at a staggering 7.2 percent and climbing, manufacturing is at a 28-year low, and this was the worst January for the economy in over a quarter century. I could go on, but we are here today to look toward the future, toward recovery and reinvestment.

Moreover, I am not here to cast blame about how we got here. Both sides are guilty of making poor decisions on shaping our economy. But today is critical. We need, as the President stated, to put aside ideological differences, focus on our economic condition and make decisions based on what the facts and evidence indicate will really be effective. We cannot afford to waste more American taxpayer dollars. We cannot afford to advance political dogma. We cannot afford to make a trillion-dollar mistake.

If we are going to spend billions to stimulate the economy, we had better get it right. The central question is whether this enormous spending and tax bill would be effective in turning around the economy, preventing further layoffs and creating new jobs. If it will do what is needed, it is worth the money and we must pass it immediately.

While both sides of the aisle agree about what we want to achieve, we disagree about the means to achieve them. Despite popular Democratic belief, Republicans are not trying to block the stimulus package; we are trying to improve it. And while Senate Republicans have tried to offer our ideas to the American Recovery and Reinvestment Act, we have been largely excluded from helping formulate this bill.

A Feb. 2 Los Angeles Times editorial, titled "The Nation Needs Jobs, Not a Political Agenda," correctly points out this stimulus package - the largest stimulus since World War II - could and should have been crafted to garner Republican support.

Instead, the stimulus is a hodgepodge of liberal-targeted spending projects with a few decent ideas thrown in to try to appease Republicans. The majority of this bill is aimed at promoting mostly public-sector jobs for short-term projects, such as building roads and infrastructure.

A large fraction of the proposed stimulus package is devoted to infrastructure projects that would spend out very slowly, not with the speed needed to put the economy on the path to recovery in 2009 and 2010. While some of these public jobs are necessary, we also must provide incentives for private sector jobs. Furthermore, the stimulus needs to take effect immediately and not continue to provide a stimulus once the economy has turned around.

While President Obama has said he believes government spending provides the most "bang for the buck" and that there is "near-unanimity" among economists that government spending will help restore jobs in the short term, I must respectfully disagree. I believe, as do many economists, that our problems cut much deeper than what temporary government spending will be able to cure.

Harvard economics professor Martin Feldstein, president emeritus of the National Bureau of Economic Research, wrote in a recent Washington Post article: "The fiscal package now before Congress needs to be thoroughly revised. In its current form, it does too little to raise national spending and employment."

Gregory Minkew, another Harvard economics professor and the former chairman of the President's Council of Economic Advisors, notes in a New York Times op-ed that each dollar of government spending increases the Gross Domestic Product by only $1.40, while a dollar of tax cuts raises the Gross Domestic Product by about $3.

This is based on of a study conducted by Christina and David Romer, then economists at the University of California, Berkeley. Christina Romer will now serve as the chair of President Obama's Council of Economic Advisors. So, President Obama, there is not "near-unanimity" among economists that government spending delivers the most "bang of the buck." Indeed, not even among your own top economic advisors.

Democrats have stressed that they believe we need solutions that are temporary, targeted, and timely. Beyond spending for expanding government projects, there is serious wasteful spending in this package. The current bill provides up to $500 for individuals and up to $1000 for families in the so-called "Make Work Pay" tax credit, which would encourage work at the margin only for people who produce and earn less than $8,100 per year.

Studies show that in the past, these rebate checks do not stimulate the economy. For instance, studies of the 1975 rebate (and earlier tax changes) suggested that only 12 percent to 24 percent of the rebate was consumed in the quarter that it was received. Moreover, it is estimated that only 15 percent of last year's rebate checks was put back into the economy. Based on these estimates, of the $142 billion that would be allocated through the "Making Work Pay" tax credit, an average of only $24 billion would find its way back into our economy. (see slide) Is this really the most effective way to spend taxpayers' money?

The "Make Work Pay" credit is a refundable credit; anyone who works would be eligible to receive up to $500, even if that person never paid income taxes. There are other refundable credits in this bill as well, including a provision increasing the refundable portion of the Child Tax Credit.

But the bill also creates a new category of tax credit bonds called "Build America Bonds," in which a state or local government could elect to receive a direct payment from the federal government equal to the subsidy that would otherwise been delivered through the tax credit Who are we kidding? This is nothing more than an innovative way of delivering more spending through the tax code. The Majority wants to claim that these are tax cuts, but it is spending. I ask my colleagues, what is wrong with using the appropriations process for spending?

Beyond these so-called "tax cuts," we see even more spending for state and local governments. Until recently, my friends on the other side of the aisle have promoted their ideology to the extent that House Speaker Pelosi suggested that contraception will stimulate the economy because it is a cost-saving measure for state and federal government. Even though this measure has been taken out, the bill includes plenty of other government-expanding and ideology-promoting projects. State aid will only fund temporary projects that would need to be funded later down the road. Conversely, spending in the private sector would create permanent jobs that would give people more to spend and will lead to even more permanent job creation.

Look, it is not just Republicans sounding the alarm over this bill. Even the liberal San Francisco Chronicle has characterized the bill as a wasteful grab bag of spending. For example, this bill could make available billions of taxpayer dollars to left-wing groups such as the Association of Community Organizations for Reform Now, commonly known as ACORN. The plan further establishes 32 government programs at a cost of well over $136 billion.

There is a difference between permanent tax cuts and short-term stimulative spending. If we base this bill on measures we know will work, it should include a proper balance of both permanent tax cuts and short-term spending. Instead, this bill is tilted toward government spending, either through appropriations or tax expenditures. Less than 3 percent of this bill contains business tax cuts.

I would now like to turn my attention to the health care provisions contained in this package. As I have said before, health care reform is not a Republican or Democrat issue - it is an American issue. When we are dealing with 17 percent of our economy, it is imperative that we address solutions in an open and honest bipartisan process. Although the Congressional Democrats and the Administration have given a great deal of lip service to bringing change and bipartisanship to Washington, let us all remember that actions always speak louder than words.

I am also disappointed that Democrats have decided to use the stimulus legislation to address health care reform in a partisan and piecemeal fashion. Health Information Technology is a perfect example. It is an area of consensus that should have been part of a comprehensive and bipartisan health care reform dialogue.

Last Congress, Senator Mike Enzi and I worked very closely with Senators Ted Kennedy and Hillary Clinton on the Wired for Health Care Technology Act, which resulted in a bipartisan bill that was unanimously approved and reported by the Senate Health, Education, Labor and Pensions (HELP) Committee. And while the stimulus package before the Senate contains provisions on health information technology (health IT) - it does not resemble that bipartisan bill that we introduced last Congress. The most important difference is that these provisions do not represent a bipartisan agreement because members on both sides of the aisle were not involved in the discussions.

Second, the stimulus bill undermines the work of former Health and Human Services Secretary Mike Leavitt and the Bush administration by federalizing the National eHealth Collaborative. While I believe that the federal government should play a role in this area, it should not take over such an initiative. The intent of our legislation, and the intent of Secretary Leavitt, was to encourage a partnership between the private sector and the federal government to improve the quality and efficiency of health care. The stimulus legislation dissolves this public-private partnership.

Finally, the stimulus bill provides $1.1 billion for clinical comparative effectiveness, including a $400 million "slush-fund" to be used by the Secretary at his discretion. Once again, this is a topic of bipartisan interest and concern that should have been discussed in the context of comprehensive reform.

And we have not even addressed the overall cost of this bill. When interest is included, the $888 billion Senate version reaches almost $1.2 trillion. That is enough to give every man, woman and child in America $4,000 or every person in Utah $480,000. Indeed, $1.2 trillion is more than the cost of the New Deal and the Iraq War combined. The interest alone will be costlier than the Louisiana Purchase or going to the moon, adjusted for inflation. Now the bill is estimated to cost $1.3 trillion with interest. The Congressional Budget Authority has estimated that the stimulus bill will produce between 600,000 and 1.9 million new jobs by 2011. That means it will cost anywhere from $700,000 to $2.1 million to create one job. That is absurd.

To make this bill economically stimulative, we must make decisions that will be effective. Our economy began this downturn when our housing market collapsed. No stimulus will work unless we address the root of the problem. Some of my Republican colleagues are proposing to add the Fix Housing First Act, which would refinance and lower fixed-rate, 30-year mortgages for primary residences and provide a $15,000 tax credit for all homebuyers. I support this idea because it would encourage people to buy houses. In addition, we have offered a proposal to permanently lower the corporate income tax rate. We need to enact tax relief that will help save and create jobs now.

I believe that one way to truly stimulate the economy is by making the research tax credit permanent. For too long, companies have been waiting on a short-term basis to see whether or not this vital tax credit will be extended for yet another year or two. When 80 percent of the research credit is based on salaries and wages, I doubt that anyone in this chamber can honestly say that making the research tax credit permanent would not provide a great deal of "bang for the buck."

We should also look at middle-class tax relief by lowering the 15 percent bracket to 10 percent and the 10 percent bracket to 5 percent, increasing the capital loss deduction, and lowering the capital gains rate to encourage investment, which would lead to job creation.

The fact that 11 Democrats and every Republicans voted against this bill in the House is evidence that bipartisanship did not prevail. The reason it did not prevail is that there was too much spending in the legislation and not enough incentives to spur job growth and economic development. For this stimulus package to be effective, it should incorporate ideas from both sides of the aisle. We should be focusing on incentives that are permanent and broad - not temporary and targeted. We owe this not only to taxpayers today, but also to future generations of taxpayers who will be saddled with this trillion-dollar bill. In short, we owe it to every American to craft a bipartisan stimulus package that will rouse the economy instead of coming up with a partisan bill that produces little and provokes American anger.


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