WASHINGTON– Last week, as House Democrats took to the floor with near-unanimous praise for legislation to help the unemployed and stimulate the fragile economy, Rep. Lloyd Doggett (D-Texas) offered a wildly different message.
“This bill,” he said, “represents a textbook example of how not to deal with the economic challenges that our country faces.”
The Texas Democrat wasn’t talking about the extension of unemployment benefits at the heart of the bill, but an amendment providing the nation’s businesses — even the largest corporations — with tens-of-billions of dollars in tax rebates to stem recent losses. That provision, Doggett claimed, is less an economic stimulant than it is “a corporate giveaway” at the expense of taxpayers. It didn’t help the congressman’s mood that the Democrats’ bill allocates more than four times the funding to the business tax than it does to extending unemployment insurance.
“Today’s bill allocates $2 billion to the winner and $10 billion to the loser,” he said.
Indeed, although the jobless benefits are the centerpiece of the Democrats’ bill, they represent a mere $2.4 billion of the spending, according to the Congressional Budget Office — or just 10 percent of the $24 billion proposal. Nearly half of the money — $10.4 billion — will go toward the so-called loss carry-back extension, which will allow businesses, both large and small, to apply any losses suffered in 2008 and 2009 to income made in the previous five years, three years longer than current law allows. The result will be tax refunds topping $33 billion next year, according to the Joint Committee on Taxation.
Yet another amendment, to extend a popular $8,000 tax credit for new homebuyers, will cost $10.8 billion over a decade, JCT estimated.
Supporters of the two tax breaks — including Senate Majority Leader Harry Reid (D-Nev.) and Senate Finance Committee Chairman Max Baucus (D-Mont.), the bill sponsors — argue that they’ll help prop up businesses in the midst of the worst unemployment crisis in 26 years.
Yet an analysis of a similar bill by Mark Zandi, chief economist at Moody’s Economy.com, indicates that, in terms of bang-for-the-buck, the lopsided allocations in the stimulus bill are dubious. Indeed, for every dollar spent on the business tax rebate, just 21 cents are returned to the larger economy, according to Zandi. By contrast, the homebuyer tax credit returns 90 cents on the dollar, he found, while the unemployment extension returns $1.61.
Heidi Shierholz, economist at the liberal Economic Policy Institute, said that there’s “no economic rationale” for the business tax rebate. “For whatever reason that [provision] got in there,” she said, “it has nothing to do with stimulating the economy.”
At the start of the debate, it wasn’t in there.
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