Commentary | Economic Growth

Stimulus drifting into bad ideas

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C-Span reports that a bipartisan group of Senators led by Susan Collins of Maine and Ben Nelson of Nebraska are working on an amendment that will reduce the Economic Recovery and Reinvestment bill in the Senate by $107 billion. A quick analysis indicates that could reduce the amount of jobs saved or created by 650,000.

To reduce the cost of the bill, they are targeting direct spending, the very practice necessary to replace declining demand in the economy. In order to decrease the cost of the bill by that much, Senators will have to reduce spending in areas that prove to have far greater “stimulative” impact than business tax cuts, which from all reports, seem safe.

The alliance of moderate Republicans and conservative Democrats may be bipartisan, but they are moving toward bad policy.

The big ticket items that would be cut by the amendment are among the most effective provisions that Congress is considering. Even those that are spent in 2010 will provide both stimulus and long-run economic payback. They include:

• $24.8 billion in state stabilization money will prevent the layoff of hundreds of thousands of workers in state and local government. Revenue sharing with the states to save jobs is far more effective than any tax cut in the bill.

• $6.5 billion in Title I education funding will employ teachers, janitors, school aides and administrators and help replace lost tax revenues from falling property tax assessments and other sources.

• $6.75 billion for special education, to pay for teachers and aides, equipment and classrooms, administrators, transportation, nursing staff and all the other costs of educating special needs students.

• $15 billion in state incentive grants to provide better assessments of children with disabilities and limited English proficiency and to make classrooms accommodate their needs. This provision will employ consultants, special education and ESL experts, architects and construction workers, school administrators, among others and will lead to greater educational achievement by America’s most challenged students.

• $1.0 billion for Head Start, which would cover rent, teacher and aide salaries, equipment and furniture.

• $13.9 billion in Pell grants to help low-and moderate-income students pay for college, community college and trade schools. This spending has an obvious longer-term payback from a better-educated workforce. But it also frees families to spend on other necessities, to make durable goods purchases such as a car. Supporting student tuition keeps college staff employed, from janitors and groundskeepers to teachers, coaches, cafeteria staff and administrators.

 The intent of spending in these critical areas is to prevent a loss of existing jobs in state and local governments and public schools. The amendment’s authors seem to forget that a job saved is as good as a job created.

See more work by Ross Eisenbrey and Christian Dorsey