What's hidden in the 'stimulus'?

By Nathaniel Ward

On a largely party-line vote, the Senate passed the massive $838 billion "stimulus" bill this afternoon. This Trillion Dollar Debt Plan now heads for a House-Senate conference to reconcile the different versions before a final draft is voted on and sent to the White House. Liberals intend to load up the bill with still more spending during this process.

Hidden in this legislation are a number of troubling measures:

• Ending Welfare Reform. The bill would use budgetary gimmicks to effectively end the successful 1996 welfare reforms. Taxpayers will face the largest one-year increase in welfare spending ever and be on the hook for $787 billion in new welfare costs over ten years if the bill becomes law, Heritage's Robert Rector reports.

• Advancing Government Control of Health Care. Nina Owcharenko explains that health care provisions in the "stimulus" bill would advance the cause of big-government health care. "These provisions would fuel fiscal irresponsibility in state Medicaid programs, expand dependence on the already-unsound Medicaid entitlement program, distort health care choices for unemployed workers, and set up a federal infrastructure that could be used as a tool for government rationing of medical treatments, procedures, and services."

• Giving Jobs to Illegal Immigrants. Up to 300,000 illegal immigrants could get construction jobs funded by taxpayers through the "stimulus" legislation, Rector reports in another analysis. Absent reforms to the language of the bill, "the inevitable result would be billions in federal funds spent to employ illegal immigrants."

The bill's passage was assured when three Republican Senators agreed to support a compromise version of the bill (which was basically the same as the original version). But they might not support the legislation if liberals carry out their plans to add more spending, Heritage's Rory Cooper reports: "Senator Arlen Specter (R-PA), one of the Senators responsible for the compromise, is on record as saying he would only support the final bill if it came back with no changes, or 'virtually intact.'"

Including both the House and the Senate, 216 out of 219 Congressional Republicans voted against the plan.

Why the 'stimulus' won't work

In televised remarks last night, President Barack Obama urged Congress to move quickly on finalizing the legislation, saying that failure to act would mean still further economic decline.

This just isn't true. In fact, Heritage economist J.D. Foster told a conference on economic recovery today that the Trillion Dollar Debt Plan will only deepen the recession. The non-partisan Congressional Budget Office agrees, arguing that it will depress economic activity.

Worse, Foster argued that the massive spending could drive up interest rates to crippling levels, while the tax increases scheduled for next year will not advance the recovery one bit.

On Heritage's Foundry blog, Conn Carroll looks at other "stimulus" myths repeated during the press conference.

There's no 'stimulus' consensus

In his remarks yesterday, the President said that most economists from across the political spectrum support this sort of massive government spending to "stimulate" the economy.

Writing on National Review Online, Heritage budget expert Brian Riedl debunks the myth of "bipartisan consensus" on this legislation.

Nobel Laureates Ed Prescott, James Buchanan, and Vernon Smith recently joined 200 other economists signing a letter opposing the legislation. Other notable economists critical of the stimulus package include Nobel Laureate Gary Becker, as well as Robert Barro, Greg Mankiw, Arthur Laffer, and Larry Lindsey. Martin Feldstein, who had been the only notable conservative economist loudly supporting the stimulus, has since changed his mind.

More liberal economists such as Alice Rivlin and Alan Blinder have also strongly criticized certain aspects of the spending bill.

Even President Obama's own economic advisers—who are leading the fight for the "stimulus" bill—previously criticized the bill's economic underpinnings.

"If deficit spending were truly stimulative," Riedl writes in a separate article, "then the current $1.2 trillion budget deficit would already be overheating the economy. It clearly is not. Thus, Senators should reject a "stimulus" bill that is based on 1933 economics and ignores 75 years of research and evidence about how growth is created."