World - US;Obama's Stimulus: Jump-Starting His Long-Term Agenda

Jay Newton-Small

When Congress first started looking at an economic stimulus package last year, House Speaker Nancy Pelosi was quick to lay out three important guiding principles: that the provisions be "timely, temporary and targeted." "If we heap too much on top of the package, it will then take us deeply into debt," she warned in a speech on the House floor on Jan. 29, 2008. But now, as Congress gears up to craft a mammoth stimulus package that will dwarf last year's $170 billion bill, those requirements don't seem to be all that binding.

President-elect Barack Obama admitted as much in a major speech on Thursday, making the case for Congress to act quickly on his plan, dubbed the American Recovery and Reinvestment Plan. "There is no doubt that the cost of this plan will be considerable," he said. "It will certainly add to the budget deficit in the short term. But equally certain are the consequences of doing too little or nothing at all, for that will lead to an even greater deficit of jobs, incomes and confidence in our economy." (Read Obama's full remarks.)

As qualms about the debt take a backseat to worries about a depression, the scope of the stimulus plan has grown to include everything from expanding Pell grants for college students and health care for the unemployed to investment in renewable energy. Instead of temporary measures meant to prop up the sagging economy over the next two years, much of what has been proposed looks like a laundry list of Obama campaign promises. If the plan is passed, Obama will get, in one fell swoop, a running start on large swaths of his long-term agenda, the ultimate cost of which no one yet knows.

"If all of the infrastructure and the programs to temporarily help individuals, to temporarily [help] companies, if all of this becomes bureaucratic institutions that are in place from now until forever, we're in trouble," says Thomas Donahue, president of the U.S. Chamber of Commerce, which represents more than 3 million businesses. "You stop and think of some of these things and you say, 'All right, that's just for two years.' Well, who's going to be in charge two years from now, saying 'We're not doing that anymore'?"

Toward the end of the general-election campaign, Obama was asked repeatedly what initiatives he would cut given the increasingly bleak economic reality. His responses then were suitably vague, and it turns out the answer appears to be: very few. Instead, most of those programs (and their price tags) are being added to the American Recovery and Reinvestment Plan, all in the name of fixing the economy.

Until recently there has been relatively little objection to all this from Republicans. Obama has cannily trumpeted the fact that 40% of his proposed $775 billion bill, or $310 billion, would go toward tax cuts. The problem is that $775 billion represents the cost over just two years; after that, voting to reinstate taxes — or to cut back on popular programs like health care, help for the unemployed and aid to students — may well be difficult. Paying for all these programs down the road will be complicated further if Democrats try to reimpose, as they have sworn to, pay-as-you-go — a rule that requires all new spending to be offset by new revenue or cuts elsewhere. And all this talk of trillion-dollar deficits is starting to make Republicans as well as fiscally conservative House Democrats (known as Blue Dogs) nervous — so much so that Obama recently pledged to overhaul entitlement programs to help avoid another fiscal train wreck down the road.

So what, exactly, has been proposed in this short-term/long-term stimulus? Here are some areas in which money being spent now may continue to be spent well into the future:

• Education: On the table are funds to help special ed students, expanded Pell grants for college students and increased money for Head Start programs. All of these items were Obama campaign promises that will require renewed funding in two years; they will be difficult for Democrats to scale back.

• Health care: A $100 billion package features money to expand health insurance for laid-off workers, known as Cobra, for longer periods of time and for those who did not have health insurance with their former employers, as well as funds to help state shortfalls on Medicaid. Of this package, $20 billion would be used as a "down payment" for one of Obama's campaign pledges: a separate $50 billion program to modernize the nation's medical records, most of which sit in filing cabinets instead of being recorded online. While the Medicaid grant to states would be a onetime deal (and one that the GOP would prefer to see as a loan), the other initiatives would require additional funding down the road. As in the case of Cobra, they would be hard to let lapse in two years' time.

• Tax cuts: About $310 billion worth of tax cuts have been proposed. Many of these provisions are onetime measures that would allow companies to write off 2008 and 2009 losses and small businesses to write off expenditures up to $250,0000; a one-year tax credit would give companies $3,000 for each new hire and employee retained. Obama has also suggested a $500 rebate for individuals and $1,000 for couples; even those who don't make enough to pay taxes would receive some kind of rebate for the taxes that are automatically deducted for Medicare and Social Security. Republicans have suggested cutting the middle-income tax rate to 15%, from 25%, and businesses are pushing for money for companies, such as airlines and start-ups, that have not paid taxes in the past two years and don't qualify for rebates.

• Energy: Obama has proposed including the creation of a national energy grid to harness and distribute energy from renewable sources such as wind, solar and hydroelectricity. He would also double the funding for the Manufacturing Extension Partnership, a program slashed by Bush that seeks to make U.S. manufacturing more efficient by using new technologies. These are two small pieces of the President-elect's massive $150 billion green-jobs plan he touted on the campaign trail that is expected to come later this year or next.

Not all of these proposals may make it into the final version of the stimulus bill. And this outline comes before members of Congress have laid out their wish lists of pet projects, which they are likely to do, despite Obama's claim that the package will be earmark-free. Critics of the bill have taken comfort from the possibility that both chambers will hold hearings before its passage, giving them an opportunity to air their grievances. "I remain concerned about wasteful spending," House minority leader John Boehner told reporters after meeting with Obama on Tuesday. "Simply put, we should not bury future generations under mountains of debt and create 600,000 new government jobs." In the face of a crumbling economy and a bill that includes massive tax cuts, voting against it — for any member, Republican or Democrat — will be a very difficult short-term proposition, regardless of the long-term costs.