Now that the Senate has passed its version of President Obama’s stimulus package, is there anything Republicans can do to improve the bill in conference committee? The short answer is: No. Substantial improvements—smarter tax relief, fewer income transfers, and much less spending—are out of the question, because such improvements could have been achieved only by a unified GOP voting bloc—Sens. Susan Collins, Olympia Snowe, and Arlen Specter had other ideas. The resulting compromise trades a little less unwise spending for a little more poorly designed tax relief. And that, unhappily, is the best we are going to get.
Nevertheless, Republicans representing the party in conference should strive to improve the final legislation in small ways consistent with conservative principles. Each chamber’s version of the stimulus has its less-objectionable features, and these should be preserved, just as the worst embarrassments should be excised. Here are some broad guidelines to follow:
On taxes, Republicans should push for the largest and most inclusive possible child tax credit. The House bill expands the credit, which partly compensates parents for the investments of time and money they make in the next generation of citizens. But a better version can be found in the Republican Study Committee’s proposed economic recovery plan. The House bill merely extends eligibility to workers with the very lowest incomes. The Republicans’ plan expands the size of the credit from $1,000 to $5,000 per child. These approaches should be combined: The larger credit should be available for all parents, so long as they pay payroll or income taxes.
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Republicans should also ensure that the final package includes the Senate bill’s $70 billion AMT patch. The AMT, or Alternative Minimum Tax, is a mechanism Congress designed in the 1970s to prevent high earners from exploiting the tax code’s many loopholes. Congress did not build in controls to account for inflation, meaning that the tax ensnares a growing number of middle-class families each year. Instead of fixing the AMT, Congress occasionally passes a “patch” to protect these families from the tax that was never meant to apply to them. We’d prefer to see the AMT repealed—if Congress wants to crack down on tax evaders, it could start with the one running the Treasury Department—but short of that, lawmakers should at least spare middle-class families. Doing so will have a more stimulative effect than most of the spending in this bill.
On spending, Republicans should strive to keep the meager cuts that Collins, Snow, and Specter were able to wring from the bill, especially the $40 billion they managed to cut from an $80 billion state-bailout fund. The fund is designed to reward states that enacted (permanent) spending hikes during the (temporary) boom years at the expense of prudent states that either controlled spending or set up rainy-day funds. State governments are learning that they can always turn to Washington when the economy goes south, so they have no incentive to manage their money wisely. We are taking on dangerously high levels of federal debt because California and New York can’t balance their state budgets.
The biggest spending fight will involve the state-bailout fund, but Republicans should keep up the pressure on Democrats to defend other wasteful spending in the bill. Senate moderates got rid of a few egregious items, but Sen. Jim DeMint has identified
130 programs that receive more funding under the Senate bill than under the House bill. For instance, the Senate version includes a $2 billion subsidy for a “clean coal” plant in Illinois (which Sen. Tom Coburn has labeled the largest earmark of all time) and an extra billion dollars for something called the “Office of the National Coordinator for Health [Information Technology].”
The latter item raises the question: What is a new and permanent government bureaucracy doing in a supposedly temporary stimulus bill in the first place? If major changes to our health-care system don’t qualify for a separate debate—far removed from the apocalyptic rhetoric that has characterized the current one—then there is probably nothing that would
not count as “stimulus” for the Democrats’ purposes. The word literally means whatever they want it to mean.
With their unified opposition to the stimulus package, House Republicans gave conservatives a few days to celebrate, even though we suspected that the Senate minority wouldn’t hold. Just as we feared, the party ended the day President Obama invited Collins, Snowe, and Specter to the Oval Office for a little face time. We’re left with an irredeemably bad bill, but Republican conferees can still try to make marginal improvements: broaden the child tax credit, patch the AMT, hold the line on the state-bailout fund, and keep exposing the Democrats’ attempts to sneak through massive expansions of government.
