One More Little Stimulus Bill

dollars

Who do you think would offer a statement like this:

…jobless benefits are “one of the most effective forms of economic stimulus because every unemployment dollar returns $1.64 of economic benefits.”

If you guessed a member of the US Congress as opposed to say some daft economist then you can go to the head of the class. It was Rep. Jim McDermott, the Democratic representative from Washington. Such is the logic that drives spending in Washington these days.

I suppose you thought we were done with stimulus spending after plopping down $862 billion earlier this week, but deep down I suspect you knew better. Congress this week is embarking on a $190 billion fling.

Here’s a breakdown of the way they plan to dole out these goodies. It’s from the WSJ which has a pretty good editorial to go along with the graph.

Spending Bill

Take a look at the first item. It’s a $65 billion health care related expenditure that restores  21% in mandated Medicare physician reimbursement payments. This is a deal that was cut with the medical establishment during the health care debate but funding for it was left out of that bill. So here’s the payback which conveniently isn’t counted as a cost under the health care bill.

Now you may be saying to yourself that by its own rules — “paygo” — Congress has to pay for this with new taxes. Well you would be somewhat right. $54 billion of the $190 billion will be supported by new taxes. The rest we will borrow, which is OK since those expenditures are classified as “emergencies.”

Keep all of this in mind as you hear the political class talk of fiscal discipline and curtailing spending. Keep it in mind as you watch the Obama administration go through the motions on their new line-item veto proposal. Keep it in mind as they pretend to learn lessons from the European crisis. Spending is what they understand, and spending is what they do.

PS: Keith Hennessey has a good blog on this post that’s worth your time.

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