While media outlets nonchalantly have repeated politicians’ assertions that the forthcoming stimulus bill will cost the American public a “mere” $820 billion, $839 billion, or $789 billion, a new report released by the Congressional Budget Office reveals that the government expansion resulting from the increased funding could end up costing the American taxpayer as much as $3.27 trillion.
Although the Heritage Foundation and members of the blogosphere have billed this figure as the “true cost” of the stimulus, the estimate is based off of the House-passed H.R. 1 and does not reflect changes within the compromise bill, the text of which wasn’t actually released until 11pm last night. However, compromise changes such as the reduction of the Making Work Pay (MWP) tax credit only slightly reduce the calculated long-term costs, reducing the credit by 20% and possibly the overall ten-year cost by about $130 billion plus saved interest.
There remains a strong basis for the assumption that programs—and spending—promoted by the stimulus bill will continue long after the stimapalooza push abates.
For example, concept of the stimulus as a “down payment” has been long-standing. This undergirds the assumption that funding might just continue to key stimulus beneficiaries such as Medicaid or Consolidated Omnibus Budget Reconciliation Act (COBRA) subsidies for the unemployed, the “Making Work Pay” tax credit (24.4% of which is “refundable”), federal funding for state medicaid programs, and new special education funding.
The White House, when discussing the “metrics” of the passage in January, released a report which said that “The American Recovery and Reinvestment Plan is designed not only to jumpstart our economy and create jobs, but to lay the foundation for a more competitive 21st century economy. Through investments in clean energy, health care, education and other areas, the plan will address long- ignored national priorities…while making a down payment on our nation’s economic future” (emphasis added).
Associated Press writer Daniel Loverling continued this rhetoric in a February 9 article that states the “estimated $90 billion to $100 billion in proposed infrastructure spending amounts to a mere down payment on what’s needed to repair and improve the country’s physical backbone.” But Loverling is more honest, citing the long term figure provided by the American Society of Civil Engineers of “$2.2 trillion over the next five years” to fix “the nation’s roads, dumps, dams, bridges, schools and rail systems.” According to an ASCE spokesman, that amounts to underfunding infrastructure by about $1.1 trillion.
Today, the New York Times went so far as to claim on February 12 that the updated, $789 billion stimulus bill is “trim” and “considerably leaner” than previous legislation, although only about four to six percent of the bill’s up-front costs were cut during the compromise session. David M. Herszenhorn and Carl Hulse write that “The new stimulus package seemed to defy Washington’s peculiar laws of physics, where numbers that go up don’t often come back down.”
“But by producing a compromise bill with a sticker price of about $789 billion—less than the amount of approved in either the House or the Senate—Congress appears to have ensured quick passage,” they write.
Buried in the second page are hints at the enormous size of the package: “Even trimmed to $789 billion, the recovery measure will be the most expansive unleashing of the government’s fiscal firepower in the face of a recession since World War II.” Herszenhorn and Hulse don’t mention that some historians believe that the Great Depression was actually prolonged by the tax-and-spend policies of Franklin D. Roosevelt’s New Deal.
“And yet it seemed almost trifling, compared with the $2.5 trillion rescue plan for the financial system…that was announced on Tuesday by Treasury Secretary Timothy Geithner,” they write.
If the legacy costs of American Recovery and Investment Act are even close to those of Geithner’s plan, the bill won’t be so “trifling” any more. It will, in fact, rival Geithner’s plan.
House and Senate votes on the compromise bill are scheduled for today. View the debates here on CSPAN.