We -- press, people, politicians -- still have yet to get a sense of why the various programs reduced or cut from the economic stimulus legislation were chosen. I spoke this morning to a Democratic Senate aide familiar with the Nelson-Collins negotiations who denied the big-round-number theory ("Let's just lop $100 billion off the top") and instead emphasized that the focus "was more on the content on the bill. Some of the programs they were cutting weren't as stimulative as they could be. They wanted a really strong bill that would create jobs."
But the aide was unable to provide a specific economic justification for why the centrists cut all of the flexible state fiscal aid and reduced school construction funding, rural broadband, public health provisions, etc., many of which are considered by economists to be the most effective tools for stimulating aggregate demand. Nor was there an answer available for why programs like the tax rebate for home purchases, which has a low fiscal multiplier and is quite regressive, are still in the bill. Ed Kilgore offers an interesting theory of why state fiscal aide -- again, a provision central to the bill's purpose of dampening the recession's impact -- came out of the bill, which centers around some fraught state-level politics.
Of course, the obvious answer here is that the centrists want to be able to say they support "fiscal responsibility," however defined, and that Republicans love regressive tax cuts. Both of those principles theoretically attract support for the bill; we'll see how much during tonight's cloture vote and tomorrow's vote to pass the bill and send it to conference. But I'd like to see at least a pro forma attempt to justify the decisions in the centrists' amendment.
-- Tim Fernholz
