Twice Fooled: A Third Go at the Economy
The two most prominent bills that passed Congress this session have been legislative, not economic, accomplishments.
Bipartisanship achieved a $150 billion stimulus package that handed out rebate checks – or, as the Mayor of Stamford put it, TVs – and a $700 billion bailout to buy up troubled assets. The conventional wisdom now is that the stimulus package temporarily staved off a drop in consumer spending, but did nothing for the nation’s medium- or long-term economic health. (Stimulus does, let’s not forget, mean “something that encourages an activity or process to begin, increase, or develop.”) And debate about the bailout has morphed from a discussion of how to buy up troubled assets into a discussion of legislative intent: did Congress provide Treasury the authority to inject capital directly into banks in exchange for part ownership? So, wait, what was that $700 billion for again?
Congress – or, at least, the House – plans to take another crack at kickstarting the economy in ways ordinary Americans will recognize: Speaker Pelosi will convene a meeting of House Democratic leaders on Monday to discuss a second stimulus package. (Senator Obama held out the promise of an additional stimulus as an inducement to reps reluctant to endorse the bailout plan.) Statements by House members indicate that the package will include an extension of unemployment benefits, funds for state and city governments, and money for infrastructure projects, all of which were omitted from the original stimulus.
In September, the House passed a similar plan that included $12.8 billion for highway projects, $3 billion to repair schools, $3.6 billion for transit infrastructure, and $500 million for Amtrak upgrades, among other supplemental appropriations. The bill also extended unemployment insurance (as did a stand-alone bill passed several days later) and increased federal assistance with Medicaid costs.
The crucial addition to this plan would be more money for state and city governments (beyond the Medicaid assistance). The New York Times reports that such aid could reach $150 billion and notes that as state and city governments confront decreasing revenue and growing deficits, spending cuts – in jobs, services, and benefits – are right around the corner. Indeed, the Center for Budget and Policy Priorities found in September that 15 states and the District of Columbia currently face budget deficits and urged Congress to provide relief soon. Citing effective, but belated, relief to states in the first recession of the decade, the report warns:
The major problem with that assistance was that it was enacted many months after the beginning of the recession, so it was less effective than it could have been in preventing state actions that deepened the economic downturn. The federal government should consider aiding states earlier, rather than waiting until the downturn is nearly over.
Congress has now had two cracks at the economy. The third should take direct aim at the struggling unemployed, at the nation’s inadequate infrastructure, and at cash-strapped state and city governments.