The House and Senate’s agreed upon recovery and reinvestment package is a huge step forward as our nation seeks to recover from a recession that has cost 3.6 million jobs since December 2007. Every single state has experienced the consequences of an economy ravaged by failed economic policies and regulatory institutions’ failure to do their jobs. The American Recovery and Reinvestment Act will save or create 3 million to 3.5 million jobs, get the economy back on track so the private sector is once again creating growth and jobs on its own, help those who have been hurt the most by the downturn, and start making investments in energy, health, education, and other areas that are key to our long-term economic success.
This was a tough compromise to hammer out with conservative votes needed to pass a bill in the Senate. The necessity of their participation has made the legislation less effective than it might have been. But all those who support the final bill should be praised for getting past their differences to enact legislation that the nation vitally needs.
The road back to a robust economy is going to be a long one. We will almost certainly continue to see job losses for the rest of the year and possibly beyond even with Congress and the president taking action. But these measures will start to put a brake on the downward spiral that is currently consuming the economy and set the stage for a rebound.
The final compromise made some improvements over the bills passed in the House and Senate, made it worse in other ways, and split the difference in still others.
One of the more praiseworthy steps was cutting the Net Operating Loss tax break from a cost of $17.2 billion to $947 million; this provision had been in both bills. One of the biggest disappointments was that the Senate’s Alternative Minimum Tax patch stayed in the compromise legislation at the expense of greater aid to the states to deal with their dire fiscal situations and funding for school construction—both of which offer a much greater boost for the economy. Funds for the states were increased relative to the Senate bill, but not by much.
There are some specific provisions that might not be perfect choices for stimulating the economy, but there is very little overall that isn’t good public policy. Claims that the legislation is brimming with misspent pork barrel spending are simply false. It’s possible to make a case that the package should have been bigger and the money used slightly differently, but this is a huge accomplishment given the difficulty of gathering needed conservative votes.
One feature that was in both the House and Senate versions and that survives in the compromise is a set of some of the most elaborate accountability and transparency provisions ever in a piece of federal legislation. These provisions will do much to ensure that the large sums of public money allocated by this legislation are spent wisely.
All this is just the start. We now need to stabilize our financial sector and look to creating long-term growth. The two next big steps after the recovery legislation is signed into law will be beginning work on the fiscal year 2010 federal budget and fleshing out plans for returning the financial sector to normal operation.
The form that budget takes will have a lot to say about the recovery legislation’s effectiveness. An excessive focus on short-term budget-balancing could suck much of the recovery package’s positive effect right back out of the economy in 2010. The budget also offers an opportunity to build on the recovery package provisions that are designed to both have a short-term effect and jumpstart long-term growth. In particular, addressing health care costs and coverage, and energy, would help both economic growth and the long-term fiscal situation.
The budget debate is for the days ahead. Right now, reaching agreement on the American Recovery and Reinvestment Act should offer hope that strong action is being taken, and it shows that though the tunnel we’re in may be long, a light has been lit at the end of it.