Oh Yes, Stimulate Me, Please

So, the Senate voted to invoke cloture on the Collins-Nelson Amendment (No. 570 to H.R.1) for the stimulus, by a margin of 61 to 36. Not surprisingly, the only GOP Senators to voted for invoking cloture are Senators Collins, Snowe, and Specter. Having cleared this procedural obstacle, the Senate will vote on the passage of the bill tomorrow, which will most likely have the same margin.

From an aggregative point of view, the House and Senate versions of the bill do not differ by much. According to the CBO, the Senate version will cost about $838.2 billion, while the House version will cost about $820 billion. So if the total amount does not differ, why all the heated rhetoric? The answer is in how the monies are to be distributed:

“As it stands now, the Senate bill focuses more on tax cuts, while the House bill provides more aid to state and local governments. The Senate bill does not include $19 billion for school construction included in the House bill, reduces health insurance subsidies for the unemployed, and scales back Mr. Obama’s proposed middle class tax cut.”

If you really want to do a deep dive on the differences, GovTrack has provided this handy side-by-side comparison of the House and Senate versions of the bill.

The distribution of the monies is important because not all spending produces the same effect. Therefore, it is kind of disappointing to see the changes made in the Senate version, because they do not maximize value of taxpayer money. Take a look at CBO’s own data (pdf) on the multiplier effect of the various policy options in the stimulus:

cbo-multiplier

The data shows that tax cuts, on average, have less of a multiplier effect than transfer to states. Second, the data shows that direct transfer to individuals (of which health insurance subsidy for the unemployed is an example) is also more effective than tax cuts. Finally, even within the broad category of tax cuts, the data shows that tax cuts to lower- and middle-class people have a much bigger bang for the buck. Yet these policy options, which add more value to taxpayer dollars, are being cut back in the Senate version of the bill.

And this raises a question: if the GOP argues that the stimulus is wasteful, why would they propose policy alternatives that would decrease the value of taxpayer money? This makes no sense.

OR, does this make perfect sense, given the institutional structure of the Senate? Basically, anything that can’t get 60 votes in the Senate, on any policy of significance, is essentially dead in the water. So this is why “centrists” (gag) like Collins, Snowe, and Specter have so much power. But the need to sell this package politically trumped the empirical evidence, as it often does. So you could say that three senators basically held the American economy hostage for a weekend.

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One Response to “Oh Yes, Stimulate Me, Please”

  1. llabesab Says:

    You’ll get more stimulus from a Bayer aspirin.


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