New version of Senate stimulus bill cuts back on state aid
February 10, 2009
The Senate voted Monday 61-36 to move forward on an $829 billion bill crafted to curb widespread recessionary pressures through tax cuts and government spending, and senators will cast their final votes on the bill Tuesday.
The Washington Post reported that Monday’s procedural vote “virtually assur[es] Senate approval.”
As the final decision on the bill approaches, Cal State Long Beach students either say they hope the bill passes or that they are uninformed as to the specifics of the stimulus bill.
“I think we’ve already spent so much money on wars and bailing out corporations; and [the type of spending in this bill] is so much better than that,” said Sagar Amin, a senior biochemistry major who hopes the bill is passed.
“For now, I hope they pass it,” said Ryan Han, a sophomore creative writing major, “If we don’t fix ourselves now, we won’t have a future,”
Associate professor Christopher Burnett, who teaches the political science class “The Media and American Politics” said his students seemed relatively disengaged from the debate on the Senate bill.
“Compared to the election, I think there’s a lot less interest, which is unfortunate,” Burnett said. “Students seem to be picking up the talking points that fall in with their political outlooks.”
“I just haven’t taken the time to read any articles [about the bill] … just because nothing really seems final; it’s all up in the air,” said Bethanie Santiago, a senior accounting major.
Senators fiercely debated the merits of the bill’s spending targets, and many changes have been made since its introduction.
At one point, the total price tag had ballooned to more than $900 billion, but a small group of senators successfully cut more than $100 billion of proposed spending.
The press release included only highlights of the proposed legislation, mapping out how $289 billion of the $829 billion bill would be spent if approved.
When it was introduced, the bill included $247 billion in “tax cuts for working families” and $21 billion in tax cuts for small businesses. The press release does not say what became of these provisions.
If the legislation does pass Tuesday morning, negotiations will follow to reconcile differences between the Senate bill and the House’s version of the bill. The House’s $819 billion version was passed in January, and contains more spending and less tax cuts than the Senate version.
Less aid for states
One of the largest changes made to the bill was the $40 billion reduction in funds that would go directly to aid the states, many of which are facing serious budget crunches.
Lisa Grobar, CSULB economics professor and director of the economics forecast project, said addressing state budget issues will be crucial to lifting the nation out of recession.
When it comes to borrowing money in order to stretch budgets, the federal government has much more leeway than the states, according to Grobar. So when the nation dips into recession, the federal government can run its deficit up in order to stimulate the economy. States have fewer options.
In response to its growing budget deficit, California has resorted to scaling back on spending, laying off state employees and forcing its remaining workers to take unpaid time off.
But when states take these measures, Grobar said, it only contributes to the “viscous cycle” of recession, because it means more people will be seeing less income and, in turn, will be spending less.
While the much of the direct aid has been cut out of the bill, Sen. Susan Collins (R-Maine) — one of the senators who helped craft the revised version of the bill — said the states will also be helped by indirect aid stemming from the bill. One example she gave was the bill’s proposed $87 billion directed to help match the states’ Medicaid costs, which will free up state monies to go toward other areas.
Students said they were disheartened by the cuts.
“Coming from a college student, relying on state support, I wish they wouldn’t cut that part of the bill,” Santiago said.
“It sort of sucks,” Han said, “but for the situation it’s the right thing to do.
Tax cuts versus spending
Debate in the House and the Senate have brought out partisan differences, with Republicans saying that tax cuts are the only way to end the recession and Democrats insisting that spending is the key.
But Grobar and other economists say it is much more complicated to pinpoint which method can more effectively help alleviate a national recession, given the large amount of economic factors and the difficulty in drawing clear lines between causes and effects in the national economics.
In recent decades, Grobar said, the government has enacted tax cuts more often than spending measures in efforts to revitalize the economy.
“[Tax cuts] are not economically efficient, but are politically expedient,” Grobar said. “Everyone loves a tax cut.”
She said the infrastructure spending outlined in the bill could very well help to stimulate the economy by spending in areas like construction and weatherization.
According to the Department of Labor, 111,000 construction jobs were lost in January.
“Ideally, the kinds of spending most effective [at fighting recession] will be those to help save jobs,” Grobar said.
According to the Department of Labor, about 1.8 million jobs have been lost in the last three months.