Or, as Keith Hennessey suggests in his must-read deconstruction of the big-spending bill Congress will approve this week, the Call It Anything But Don’t Call It Stimulus Act. Nancy Pelosi calls it the American Jobs and Closing Tax Loopholes Act of 2010, which forms the acronym AJCTLA, and that sounds like nonsense when spoken. It’s a perfect match for its title, as Hennessey explains, because it does nothing to help American jobs and everything to allow Congress to help itself to even more fantasy money.
In fact, it manages to both increase the deficit and hike taxes, a rather neat little trick that one might think would embarrass even Democrats in 2010. The CBO confirms that AJCTLA has the following long-term consequences:
- $40 B net tax increase
- $174 B spending increase
- $134 B deficit increase
How does it manage to do that? Hennessey gives us the bullet points:
- increases infrastructure spending by $26 B over ten years;
- extends a raft of expiring tax provisions, mostly for one year
- provides funding relief for certain employer pension plans;
- raises a bunch of taxes, mostly on businesses and a certain kind of partnership income called “carried interest;”
- extends unemployment insurance benefits, increasing federal spending by $47 B over the next two years;
- increases Medicare payments for doctors for eighteen months at a $63 B cost;
- increases health insurance subsidies for the unemployed (through “COBRA”) by $8 B over the next two years; and
- increases federal Medicaid spending by $24 B for a six-month policy change.
Yes, at exactly the moment when businesses need pricing signals for a decrease in costs in order to attract the kind of investment that spurs growth, Congress wants to hike taxes instead — in order to pay for its own aggrandizing public projects. How will investors react to this? We will get an idea when the second- and third-quarter GDP numbers get published later this year, but it’s not for nothing that major firms now predict a much smaller level of growth from even the moderate growth we’ve already seen in 2010.
Hennessey lists five reasons why this bill represents rank hypocrisy on the part of Democrats in Congress, but the first two are more than sufficient. The new bill will not pass Pay-Go rules, which Democrats celebrated as conclusive evidence of their fiscal responsibility when the passed the rule in February. That’s really nothing new; they have bypassed Pay-Go for every significant bill that Democrats have proposed ever since Barack Obama signed it into law.
The second hypocrisy comes with the “doctor fix” in AJCTLA, which both violates Pay-Go all by itself and turns ObamaCare into a deficit producer. That’s also nothing new, as many of us pointed out during the ObamaCare debate. Even without the doctor fix, ObamaCare’s revenue projections and spending plans were both based on fantasy and would have run into red ink almost immediately anyway. Democrats knew that the doctor fix would blow up those imaginary numbers from the start, though, and acted as though the doctor fix was a completely separate question.
Read all of Hennessey’s analysis, but don’t expect that to stop Democrats from worsening the deficit, hiking taxes, and weakening the economy. As the last sixteen months show, that’s seems to be the extent of their talent.
Update: Of course it’s an emergency:
So far, it appears that Democrats plan to escape their own rules that require them to offset all new spending by declaring the measures to be “emergency spending.”
New spending can also be offset by tax increases under what is known as pay-as-you-go rules, but Republicans oppose tax hikes most of the time and say the problem is too much spending. Many Democrats believe tax increases are necessary but realize that they are highly unpopular with voters.
Another $23 billion in emergency spending on the nation’s schools is waiting in the wings as well.
Never let a good crisis go to waste!