- The Washington Times - Tuesday, January 27, 2009

UPDATED:

From $400 million for NASA climate-change research to $650 million for digital TV converter-box coupons, the unprecedented spending in President Obama’s economic stimulus plan is provoking questions about whether it can create jobs and jolt the country out of recession.

The $825 billion bill, which is headed for likely House passage Wednesday, is being scrutinized increasingly by Republicans and economists because it doles out billions of taxpayer dollars for everything from the 2010 census to university research to contraceptives at family-planning clinics - areas far removed from the meltdown in finance, housing and automotive industries.

“This bill is not all stimulus,” said David M. Walker, the former head of the Government Accountability Office and president of the fiscal issues advocacy group Peter G. Peterson Foundation.

He said the potential stimulus effects from the bill are diluted by spending on government facilities and public-assistance programs. “We ought to have open and honest discussion and debate about the merits of each,” he said.

See related story:Stimulus bill a ‘moving target’

The rescue package, dubbed the American Recovery and Reinvestment Act, pours $41 billion into local school districts, $1.1 billion into Amtrak, $600 million into buying energy-efficient cars for the federal government, $275 million into fixing State Department computers, $200 million into sprucing up the National Mall, including new sod, and $50 million into the National Endowment for the Arts.

“It’s ridiculous. It won’t work. It won’t stimulate,” said John Seater, an economics professor at North Carolina State University. “Any kind of spending will stimulate the sector of the economy where the money is spent, but I don’t know that these industries are depressed. … You can’t just move somebody over from housing construction to climate research.”

Mr. Seater and other conservative economists suggest reducing the marginal tax rate to create incentives for business growth.

“It’s not like this is the 1930s and this is the first time we’ve done this,” Mr. Seater said. “We’ve been doing this for 70 years, and we’ve learned a few things. But you wouldn’t know it from what is going on in Washington.”

Meanwhile, Mr. Obama’s plan is backed by economists such as Johns Hopkins University professor Bruce Hamilton, who said the price tag is about the right size to plug an expected $1 trillion loss from the U.S. gross domestic product over two years. After that, he said, it doesn’t matter where the money is spent.

“It takes workers to put sod on the Mall,” Mr. Hamilton said.

The House version of Mr. Obama’s plan offers $275 billion in tax cuts, including a $1,000-per-couple income tax cut for most Americans and a doubling of expense write-offs for small businesses. It doesn’t reduce the marginal tax rates, a measure pushed by Republicans but rejected by Mr. Obama.

One of the tax provisions has come under fire for undermining efforts to revive the banking industry. It would repeal a tax break allowing healthy banks to write off losses of ailing banks they acquire.

The tax loophole, which the Treasury Department opened quietly as part of its bank bailout efforts last fall, facilitated major distressed bank mergers like Wells Fargo’s takeover of Wachovia.

Despite the criticisms, House Speaker Nancy Pelosi, California Democrat, remained confident that the bill would pass the House with some bipartisan support, spokesman Drew Hammill said.

“The attempt to highlight minor provisions in this package does not obscure that fact that this legislation will create or save 3 to 4 million jobs and deliver much-needed tax relief to 95 percent of working Americans,” he said.

House Minority Leader John A. Boehner of Ohio and other top Republicans have announced opposition to the bill. They say the tax cuts don’t go far enough and the $550 billion in spending is excessive and misdirected.

“I’m concerned about the size of the package, and I’m concerned about some of the spending that’s in there,” Mr. Boehner said. “How you can spend hundreds of millions of dollars on - on contraceptives, how does that stimulate the economy?”

Mr. Obama will court Republican support for the bill Tuesday on Capitol Hill.

Rep. Chris Van Hollen, Maryland Democrat and assistant to the speaker for policy and politics, said the stimulus should be judged for its “whole broad picture” of investments in infrastructure, green technology and health care coupled with tax breaks for the middle-class families and small businesses.

“So I think if you look at the $825 billion overall, it is the kind of boost the economy needs and at the same time makes the investments that we need to make for the future,” Mr. Van Hollen said.

Democrats are confident the largesse will pay off.

Mrs. Pelosi said she has “no apologies” for spending billions of dollars that may not create jobs, including taxpayer funding for contraceptives and abortion services - an item that drew sharp Republican criticism after it headlined the DrudgeReport Internet news site.

The bill would expand Medicaid to cover family-planning services, matching $9 for every $1 states spend on birth control or abortions.

“Well, the family-planning services reduce cost,” Mrs. Pelosi told ABC’s “This Week” host George Stephanopoulos on Sunday.

“The states are in terrible fiscal budget crises now and part of what we do for children’s health, education and some of those elements are to help the states meet their financial needs,” she said. “One of those … the contraception, will reduce costs to the states and to the federal government.”

• Tom LoBianco and Patrice Hill contributed to this report.


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