The Public Policy
A Growth Period
When it comes to stimulus, politicians run on two speeds: big government — and bigger.
At least when Bill Clinton was president, we used to pretend that the era of big government was over. Such an illusion is impossible to maintain in the present political climate. It’s the big spenders versus the bigger spenders.
First George W. Bush presided over the biggest binge in discretionary spending and the largest new federal entitlement since Lyndon Johnson. He proposed the first $2 trillion federal budget in the nation’s history. Just five years later, Bush followed up by unveiling the first $3 trillion budget.
Now Barack Obama wants to spend at least another $800 billion on top of the $700 billion Wall Street bailout passed just months ago. And of course the president wants the stimulus package signed into law before his Treasury secretary deigns to tell the taxpayers how he plans to spend the remaining bailout money.
It gets worst: all that stands in the way of the Democrats rubberstamping Obama’s new spending is the tiny Republican minority — made up mostly of the same people who rubberstamped Bush’s spending.
Republicans did what they could in the House, voting unanimously against the stimulus bill. But there isn’t much a House minority can do. In the Senate, however, the Republicans (just barely) have the votes to delay or even stop legislation in its tracks. If the stimulus measure were to run into another unified wall of Republicans in the upper house, it would be in serious trouble.
Don’t count on it. A group of moderates from both parties — Republicans Susan Collins and Arlen Specter, Democrats Ben Nelson and Joe Lieberman — swooped in Gang of 14-style to salvage the spending package. The Nelson-Collins deal excises some $100 billion in spending from the House version. This includes $3.5 billion intended for energy-efficient federal buildings, $75 million that would have gone for the Smithsonian, and $100 million from the National Oceanic and Atmospheric Administration.
The biggest single item is the elimination of $40 billion in state fiscal stabilization funds. Yet in typical Washington fashion the final price tag is no smaller than the House version. In fact, at $827 billion it presently costs about $7 billion more.
Even so, House Democrats want to restore as much of their original spending as possible. House Speaker Nancy Pelosi described the Nelson-Collins cuts as “very damaging” and said she was “very much opposed to them.” Even as the moderate senators are suggesting they may withhold support from whatever emerges from conference if their deal unravels, the Congressional Progressive Caucus is threatening to make trouble in the House if they don’t get their spending on education or the states.
But cutting spending is not an option. An alternative Republican stimulus bill that would cost a little more than half as much exists, but has no chance of passing. The entire debate will focus on the composition of the stimulus and how close to $1 trillion (before interest) the cost to the taxpayers gets. Not whether government will get bigger, but exactly how big it is going to get.
The rush toward another expansion of government continues even though Washington doesn’t have the money. The budget deficit for 2009 is already approaching $1.2 trillion, almost triple last year’s and the largest dollar amount in history. The political class is unlikely to pause, even though the nonpartisan Congressional Budget Office has estimated that the stimulus package will harm the economy more in the long term than doing nothing. And what is being undertaken now as a one-time emergency may well have enduring, even permanent consequences.
When the country’s first $1 trillion deficit was projected, House Minority Leader John Boehner urged his fellow lawmakers to exercise caution. “The deficit estimate makes it clearer than ever that we cannot borrow and spend our way back to prosperity when we’re already running an annual deficit of more than one trillion dollars,” he told reporters.
That won’t stop the federal government from trying.
About the Author
W. James Antle, III, author of the new book Devouring Freedom: Can Big Government Ever Be Stopped?, is editor of the Daily Caller News Foundation and a senior editor of The American Spectator. You can follow him on Twitter @jimantle.
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Robert Rosencrans| 2.9.09 @ 10:01AM
A good read.
http://www.heritage.org/Research/Economy/wm2276.cfm
Welfare Spending
by Robert E. Rector
WebMemo #2276
The recently passed U.S. House of Representatives stimulus bill contains $816 billion in new spending and tax cuts. Of this sum, $264 billion (32 percent) is new means-tested welfare spending. This represents about $6,700 in new welfare spending for every poor person in the U.S.
But this welfare spending is only the tip of the iceberg. The bill sets in motion another $523 billion in new welfare spending that is hidden by budgetary gimmicks. If the bill is enacted, the total 10-year extra welfare cost is likely to be $787 billion.
The claim that Congress is temporarily increasing welfare spending for Keynesian purposes (to spark the economy by boosting consumer spending) is a red herring. The real goal is to get "the camel's nose under the tent" for a massive permanent expansion of the welfare state.
In the first year after enactment of the stimulus bill, federal welfare spending will explode upward by more than 20 percent, rising from $491 billion in FY 2008 to $601 billion in FY 2009. This one-year explosion in welfare spending is, by far, the largest in U.S. history. But spending will continue to rise even further in future years. The stimulus bill is a welfare spendathon, a massive down payment on Obama's promise to "spread the wealth."
Once the hidden welfare spending in the bill is counted, the total 10-year fiscal burden (added to the national debt) will not be $816 billion, as claimed, but $1.34 trillion. This amounts to $17,400 for each household paying income tax in the U.S.
Even without the extra spending in the stimulus bill, means-tested welfare spending is already at a historic high and growing rapidly. In 2008, federal, state, and local means-tested spending hit $679 billion per year. Without any legislative expansions, given historic rates of growth in welfare programs, federal, state, and local means-tested welfare spending over the next decade will total $8.97 trillion. The House stimulus bill adds another $787 billion to this total, yielding a 10-year total of $9.8 trillion. The total 10-year cost of means-tested welfare will then amount to $127,000 for each household paying federal income tax.
The Current Welfare System
Means-tested welfare spending programs give cash, food, housing, medical care, and targeted social services to poor and low income persons. In a means-tested program, benefits are limited to persons below a specified income level. The cutoff income level varies from program to program but is typically less than 150 percent of poverty, or around $33,000 per year for a family of four.
For example, food stamps and public housing are means-tested (or limited to lower-income persons) while Social Security and postal service are not. Means-tested welfare also includes "refundable" tax credits. With a refundable credit program, the government gives cash grants to persons who owe no income tax. Like conventional means-tested programs, refundable credits give aid to poor and lower income persons. Federal welfare spending also includes targeted grants to schools with large numbers of poor students. (This is a relatively small portion of overall federal welfare spending.)
The federal government runs over 50 means-tested welfare programs, including Temporary Assistance to Needy Families; Medicaid, food stamps; the Earned Income Tax Credit (EITC); the Women, Infants, and Children food program; public housing; Section 8 housing; the Community Development Block Grant; the Social Services Block Grant; and Head Start.
New Welfare in the Stimulus Bill
The House stimulus bill overtly increases federal welfare spending by $264 billion. Most of this spending will occur in the first two years after passage. For example, if enacted, the House stimulus bill will spend an additional $88 billion in means-tested welfare aid in FY 2009, an increase of more than 20 percent above prior spending levels. Federal welfare spending (including small increases built into existing law) will rise from $491 billion in FY 2008 to $601 billion in FY 2009. This one-year spending explosion (by far the largest in U.S. history) will not be a byproduct of unemployment generated by the recession but the result of a deliberate expansion of welfare eligibility and benefits by President Obama and Congress.
Camel's Nose in the Tent
While $264 billion in new welfare spending may seem like a lot, it is only the tip of the iceberg. If the stimulus bill is enacted, the real long-term increase will be far higher. This is because the stimulus bill pretends that most of its welfare benefit increases will lapse after two years. In fact, both Congress and President Obama intend for most of these increases to become permanent.[1] The claim that Congress is temporarily increasing welfare spending for Keynesian purposes (to spark the economy by boosting consumer spending) is a red herring. The real goal is a permanent expansion of the welfare system.
The notion that Congress intends to temporarily increase Pell grants and EITC benefit levels for just two years and then allow benefits to fall back to their original status is out of touch with Washington reality. Any Congressman who, two years from now, suggests that the new welfare spending be allowed to lapse to pre-stimulus levels would be pilloried for slashing welfare.
skep41 | 2.9.09 @ 10:37AM
The political class has now been steeped in leftist rhetoric for two generations and the majority of the people in the political class and the upper tiers of management of large corporations buy into this misguided stimulationism. The gawking public is just trailing along happily after their 'betters' waiting for the goodies to fall off the back of the truck. Its as though the Cold War and the implosion of the statist economies never happened. If the government decrees prosperity than prosperity there shall be! Of course all those generous benefits, like the fabulous pensions given to public employees and the ever-growing benefits handed to the elderly, are indexed to inflation, ensuring that the system will collapse of its own weight within a very short time. it saddens me to see a formerly great nation forget the traditions that made it great and opt for poverty and tyranny.
Robert Rosencrans| 2.9.09 @ 6:38PM
Here is a link to the 10 most miserable cities in America. Obama's hometown, Chicago, is number 3. What do all these cities have in common? Liberalism. High taxes, anti-business and run by corrupt Democrats.
http://www.forbes.com/2009/02/06/most-miserable-cities-business-washington_0206_miserable_cities.html
Marc Jeric| 2.10.09 @ 1:19AM
So with $900 billion of pork and welfare (including %5.1 billion for Abu Hussein's brown shirts of ACORN) we will have 3 million new OR PRESERVED jobs - how smart! If we end up with 3 million fewer jobs the smart one can say that without this abomination of pork and welfare we would have 6 million less jobs, etc. That's Harvard affirmative action for you! In any case, $900 billion divided by 3 million makes it $300,000 per job - how about that!
hgjh| 11.24.09 @ 9:12PM
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