By the time the latest economic stimulus bill careened onto the House floor Wednesday night, it was carrying some new baggage.
One added provision would let companies make smaller contributions to employee pension plans for two years. Another would permanently scale back the alternative minimum tax for individuals as well as corporations.
Both may have their merits. But their effectiveness as short-term stimulus measures is arguable, and their appearance in the House bill helps explain why a legislative effort that began with the best of bipartisan intentions appears likely to end in bitter deadlock. In the view of some economists and policy advocates, that might not be such a bad thing.
"To me, it's not a close call," said Robert Greenstein, executive director of the Center for Budget and Policy Priorities, a liberal think tank. "I think the country and the economy over the long term would be better served by doing nothing than by doing this."
"Everybody got a little bit too ambitious," said Robert Bixby, executive director of the Concord Coalition, which lobbies for long-term budget restraint. The stimulus measure "may be unnecessary, it probably tries to do too much, and it would be better to take up a bill of this size in the context of the president's budget when it comes up next month."
Greenstein and Bixby may get their wish. Although the House was expected to approve the latest Republican-drafted stimulus plan early today, it appeared unlikely that the Democrat-controlled Senate would act on the measure before recessing for the year.
Efforts to assemble a bipartisan package could be revived in January, but the prospects appear to be dimming with the passage of time. Some analysts believe the economy will begin to recover during the first half of 2002, with or without additional pump-priming. Their view was reinforced Wednesday when a widely watched index of leading economic indicators posted a second consecutive increase in November, suggesting the recession may end by mid-2002.
"Every day that goes by, we're starting to see more and more signs of recovery," said Bruce Bartlett, senior fellow at the conservative National Center for Policy Analysis. "It's hard to even conceive of anything that would stimulate the economy before that happens. There's virtually nothing in this package at this point that would do that anyway."
Some lawmakers, meanwhile, may see potential political benefits in gridlock. If voters perceive that one party is mainly to blame for failing to fix the economy, that could work to the other party's advantage in the 2002 elections.
"We've got some very angry views on a lot of sides here and a very high level of mistrust that's built up over several months," said Greenstein. It's very different from where it stood in the first few weeks after Sept. 11, and it's not clear whether it can be put back together."
When the economic stimulus debate began three months ago, there was general agreement on the objectives: The plan should produce a big bang right away, do no long-term harm and focus mainly on those hurt most by the economic downturn.
But members of Congress and powerful interest groups quickly turned the stimulus bill into a bandwagon for other legislative priorities, such as accelerating personal income tax reductions for affluent taxpayers and repealing the alternative minimum tax on corporations.
Some of the provisions in the House bill would provide little short-term stimulus, according to economists. Some would create a permanent drain on federal revenues, and some would address issues that have little to do with the recession that began in March and deepened after Sept. 11.
One provision, for example, would extend a temporary exemption that lets banking, finance and insurance firms avoid paying taxes on profits from overseas operations. The provision would save these companies $7.9 billion over six years, but only 3% of the benefits would arrive in time to help spark a recovery in 2002.
Peter Orszag, an economist at the centrist Brookings Institution think tank, said that, in keeping with the season, the House bill represents a "Christmas tree approach" to stimulus, one that "delivers very few presents to the economy and lots of presents to special interests."
Copyright 2001 Los Angeles Times