Morning Bell: Don’t Let The Senate Make It Worse
Conn Carroll /
The Wall Street Journal calls yesterday’s economic stimulus agreement “an almost perfect political stimulus: a one-year ‘middle-class tax cut’ for Americans in the most populous demographic group; a few tax goodies to sweeten the cash flow of certain current businesses, and a boost to the business of those world-class lobbying firms and campaign contributors, Fannie Mae and Freddie Mac.” If only we could be assured the damage would end there. Already Senate tax-and-spenders are identifying a laundry list of government handouts that must be included in any deal. A quick look at the the good and bad in the deal.
The Good:
- Accelerated depreciation tax cuts for businesses. These cuts allow companies to rapidly deduct qualified investment from their tax liability, making new investment opportunities more profitable and attractive
- No new government investments. Special interest groups had sought to tack their government handout wish lists to the stimulus bill. Fortunately spending for infrastructure projects and renewable energy were kept out of the package.
- No extended unemployment benefits. Studies show unemployment extensions only encourage workers to stay unemployed longer and discourage employers from hiring workers after temporary layoffs. Extending unemployment does not stimulate the economy.
The Bad:
- Tax rebates that won’t stimulate the economy. Besides the fact that the first checks will not be mailed until late May and some will not arrive until early August, there is little evidence that tax rebates have any stimulative effect. Studies show households planned to spend only 22% of their rebate and ended up spending only 20%-40% of it.
- Expanded government interference in housing market. Treasury Secretary Henry Paulson says he got “run down by a bipartisan steamroller” on the issue, but, whatever the reason, the deal also allows government-backed Fannie Mae and Freddie Mac to purchase home mortgages valued up to $729,750 (some $300+ more than they can now).
- The promise of more Senate spending. Senate Majority Leader Harry Reid (D-NV) has called the deal a “first step” and insisted that the package’s $150 billion price tag “is not a magical figure.” Reid and Sen. Ted Kennedy (D-MA) have already promised to add spending on items ranging from summer jobs programs to home heating subsidies.
This is an election year and Congressional approval ratings currently hover around 30%, so attempted government giveaways are to be expected. Hopefully Senate conservatives can prevent this runaway spending train from gathering any more momentum.
Quick Hits:
- The US and Iraqi governments are negotiating a strategic agreement that sees a long-term US military role in Iraq including support, equipment and training for Iraqi forces.
- Progressives lost a key Senate battle over FISA yesterday when the body rejected the Judiciary Committee bill that did not include immunity for companies that assisted in surveillance in overseas targets after 9/11. Instead the Senate will work from the Intelligence Committee bill which ensures future private sector cooperation with national security agencies.
- The FBI agent tasked with interrogating Saddam Hussein revealed that Hussein did not believe the US would invade in 2003 and also intended to restart his WMD program.
- Prius owners in Sunnyvale, California, are refusing to cut down their redwood trees despite a court order sought by their neighbor to remove them so that his solar panels can work.
- India and France agreed Friday to strengthen military ties and go beyond a ‘buyer-seller relationship,’ India’s prime minister said during a state visit by French President Nicolas Sarkozy.