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July 31st, 2009

Of stimulus and entrenched constituencies



The main selling point of the $787 billion American Recovery and Reinvestment Act of 2009, a.k.a. the stimulus package, was that it would be “targeted, timely, and temporary.” While much debate has ensued over whether the stimulus package has met any of those goals to date, some lawmakers want to add another $88 billion to it:

A disparate collection of lawmakers and special interests is pushing to extend tax credits and other benefits — effectively proposing another economic stimulus with a price tag of at least $88 billion.

Their wish list applies to measures in February’s $787 billion stimulus that were passed to provide a temporary jolt to the economy.

Nearly six months later, these measures have developed entrenched constituencies, and members of both parties are pressing to retain favored priorities. Members are under acute pressure from voters to cushion workers and businesses from the worst recession in decades.

The wish lists from Democrats and Republicans like include an extension of unemployment and health benefits past the end of this year, extending a “carryback” tax break for certain businesses, and other goodies — including not only extending the $8,000 tax credit for new homebuyers past its scheduled end in November, but extending it to all homebuyers as well.

As the article notes, Federal spending creates constituencies, and they’re always unfailingly eager to suck up ever more taxpayer money. What’s more, the article suggests that the extensions could well end up costing more than a mere $88 billion “since it is not known how long all of the extended provisions would last.”

A recent article on the progress of ARRA so far, from early July, reported that only about $100 billion of the $787 billion stimulus bill had been allocated so far. Nonetheless, some in Congress are already gearing up to sell the total tab by more than 10% before most of the stimulus has even been spent. Exit question: How much will all this end up costing in higher taxes on you and me?

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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