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Senate Stimulus: Steal from the Poor to Give to the Affluent

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ProPublica has done a comparison of the House and Senate stimulus packages. It shows, in striking fashion, how much the Grassley-Isakson-Coburn-Collins-Bad Nelson bill skews spending away from the poor–the most stimulative kind of spending, since these people need this money badly and would spend it right away–to the upper middle class:

Aid to Low-Income Families Total $124,186,000,000 $97,230,900,000 ▼$26,955,100,000
Health insurance aid   $2,272,000,000 ▲$2,272,000,000
Unemployment benefits $36,000,000,000 $39,490,000,000 ▲$3,490,000,000
COBRA healthcare for unemployed $30,300,000,000 $20,000,000,000 ▼$10,300,000,000
Hunger programs $21,176,000,000 $17,100,000,000 ▼$4,076,000,000
Housing $13,510,000,000 $8,600,000,000 ▼$4,910,000,000
Medicaid for unemployed $8,600,000,000   ▼$8,600,000,000
Job training and placement $5,120,000,000 $4,300,000,000 ▼$820,000,000
Disabled and elderly programs $4,200,000,000   ▼$4,200,000,000
Other $5,280,000,000 $5,468,900,000 ▲$188,900,000

 The Senate bill took out $27 billion in spending for the poor, ending with a total of $97 billion.

Tax Cuts Total $282,284,000,000 $358,162,000,000 ▲$75,878,000,000
Manufacturing   $1,603,000,000 ▲$1,603,000,000
Individuals $184,637,000,000 $302,198,000,000 ▲$117,561,000,000
State and local governments $42,957,000,000 $14,272,000,000 ▼$28,685,000,000
Businesses $29,483,000,000 $17,546,000,000 ▼$11,937,000,000
Energy projects $19,961,000,000 $17,682,000,000 ▼$2,279,000,000
Other $5,246,000,000 $4,861,000,000 ▼$385,000,000

The Senate bill put in $117 billion in new tax cuts for individuals–more money than the entire $97 billion they give for those items ProPublica classifies as "Aid to Low-Income Families."

Those tax cuts consist primarily of two things: the AMT patch ($64 billion), which affects primarily upper middle class people in areas with high home prices, and the house flipping subsidy (up to $48 billion), the full credit of which is only available if inidviduals pay at least $7,.500 in taxes a year (there’s also $10-11 billion for auto sales incentives).

There are other reasons to oppose including these two tax cuts in the stimulus. The AMT patch, which isn’t really stimulative in the first place, would get passed and properly off-set in the budget appropriations process anyway. And the house flipping subsidy does little else than put money in realtor’s pockets. 

But the biggest reason is this: we’re taking food, housing, and medical care away from those who desperately need it, to put more money in the pockets of the upper middle class.

The Senate "Moderates’" reverse Robin Hood: Steal from the poor and give to the affluent!

The Grassley-Isakson-Coburn-Collins-Bad Nelson Bill

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Johnny Isakson

Johnny Isakson

I explained yesterday how the people who crafted the crappy Senate compromise bill were, to a significant degree, Republicans. Republicans who won’t even vote for the bill.

But I forgot to credit the guy who really put the stupid in this bill: Johnny Isakson. Isakson is the former realtor who threw a huge sop to his realtor buddies into the bill, one that does little to actually stimulate the economy (aside from realtors, who after all got us into this mess), and which costs more than promised. The amendment, a $15,000 credit for those buying new or existing homes, will basically encourage more people to move houses–but will not necessarily incent new home building (because it applies to existing homes) nor will it encourage new buyers who would otherwise not have bought (because it’s for all buyers, not just first-time buyers).

Here’s Calculated Risk on how stupid this amendment is:

The sponsors and supporters of this tax credit believe this will support house prices – a mistake because this will mostly just shuffle homeowners between homes, and not reduce the excess supply.

If the incentive was for new homes only, the credit would probably help create some construction jobs. However, the job creation would be limited because of the competing oversupply of existing homes.

The tax credit for existing homes does almost nothing to help the economy. Some might argue that this is more work for agents and home inspectors, and might help with furniture sales, but the impact will be minor. Remember existing home sales are already at a normal level compared to the stock of owner occupied units, so agents are doing fine already (just not compared to the bubble years).

[snip]

The key problem for housing is prices are too high. How does this tax credit help reduce prices? Why are we trying to artificially increase the turnover rate? And why are we targeting a tax credit at higher income individuals?

Dean Baker, more succinctly, simply calls it the House Flipping Subsidy. And oh, by the way, it costs $30 billion more than Isakson originally claimed it would cost. The amendment is still in the "compromise bill" (the cowardly Senate voted it through on a voice vote), and Isakson is not about to vote for the final bill.

So to recap, here’s how this crappy bill came about.

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“You can play that game when it doesn’t matter.”

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Apparently (according to Senator Johnny Isakson), all the posturing the Republicans have done to rip up the safety net and push families into bankruptcy over the last 8 years didn’t really matter. In the last two weeks–since Isakson returned home to Georgia and realized such policies have real consequences for real constituents–they matter.

"Unless every member of the Senate was in a cave over the two-week recess, it’s pretty obvious that gas prices and housing crisis are the two most important issues to the American public," said Sen. Johnny Isakson (R-Ga.), a former real estate broker who was among those urging Republican leaders to stop blocking the legislation. "You can play that game when it doesn’t matter. But people’s lives, their fortunes, their largest single asset is at stake."

Though I suppose I shouldn’t be churlish with Isakson’s recent epiphany, since he is pushing the Republican caucus to actually negotiate with the Democrats.

That said, here’s how the proposed compromise would divvy up money, per the WaPo:

$300 billion guarantee: Allow the FHA to insure refinanced mortgages for homeowners who had become upside-down on their previous mortgages; lenders would have to forgive the previous loan and accept a loan that is no more than 85% of the value of the previous loan (BushCo wants to accomplish this through administrative means, but Republicans are coming around to this Dodd-Frank proposal)

$30 billion: Reimburse the Fed for any losses relating to its Bear Stearns bailout

$14.5 billion: Give people who buy a newly built home, home in foreclosure, or a home whose owner has defaulted on a mortgage in the next year a $5,000 tax credit for the next three years (this is Isakson’s proposal; and in case you’re wondering, yes, Isakson was a realtor before he became a full time politician)

$10 billion: Finance tax-exempt bonds that could be used to finance distressed subprime mortgages

$4 billion: Allow communities to buy and redevelop properties in foreclosure, thereby preventing entire neighborhoods from declining (The White House says this $4 billion–about the cost of paying for two weeks of the wars in Iraq and Afghanistan–is too expensive)

$200 million: Finance additional counselors to help those at risk for foreclosure

No cost: Require lenders to tell borrowers what the highest possible rate for ARMs would be

No cost: Permit bankruptcy judges to change interest rates on mortgages of those in bankruptcy proceedings (this measure is opposed by Republicans)

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