Economic Stimulus Reconciliation: Key Differences in House and Senate Bills

Now that the U.S. Senate has passed the American Recovery and Reinvestment Act, the Senate version of the stimulus bill must be reconciled with the House version before the final legislation is sent to President Obama's desk. Though the different bills bear a similarly staggering final price tag—  $819.5 billion for the the House version, and $838.2 billion for the Senate's bill— the Senate plan makes some pretty drastic changes in certain key areas that many economists predict will weaken its economic impact, particularly in terms of job creation.

To appease Republican Senators in order to garner the supermajority needed to pass an emergency spending bill, the Senate bill cut billions of dollars in proposed government stimulus spending from the House stimulus package and replaced it with an expanded tax cut proposal. However, leading economic experts, including Moody's chief economist, Mark Zandi, contend that tax cuts actually have a far weaker effect on the economy than appropriately directed government spending, which means that if the Senate version of the bill wins out over the House plan, the bill's stimulative effect will be substantially weakened. 

The Center for American Progress predicts that the Senate version of the stimulus bill, which CSPAN reports proposes $545.6 billion in direct spending and $292.5 billion in tax cuts, would create 343,000 to 444,000 fewer jobs than the House version, which proposes $637.2 billion in spending and $182.2 billion in tax cuts. The Economic Policy Institute agrees that the Senate stimulus bill is inferior in terms of potential for job creation. And Nobel Prize winning economist Paul Krugman says of Republican cuts to the Senate plan:

Would the Obama economic plan, if enacted, ensure that America won’t have its own lost decade? Not necessarily: a number of economists, myself included, think the plan falls short and should be substantially bigger. But the Obama plan would certainly improve our odds. And that’s why the efforts of Republicans to make the plan smaller and less effective — to turn it into little more than another round of Bush-style tax cuts — are so destructive.

CSPAN has produced an easy-to read basic breakdown of the main differences between the Senate and House stimulus plans; Pro Publica offers another useful chart. I'll outline here some of the changes in the Senate version that I find most concerning: 

The Senate stimulus plan cuts state funding

The Senate plan drastically slashes the state budget aid originally outlined in House bill by close to $40 billion. This means less funding for state Medicaid programs and state unemployment programs currently stretched to the limit by the economic crisis; one California business journal reports that 1 out of 7 states are already borrowing federal money to cover their growing unemployment fund deficits.

Less state stimulus funding also means less money for public school districts suffering from state budget shortfalls and falling property values; less money for state universities that are currently delaying construction projects and laying off or furloughing staff after losing millions of dollars from their endowments in the stock market crash.

The Senate stimulus plan cuts education funding

In an additional blow to stimulus education funding, the Senate stimulus plan completely removes a House provision for new school construction funding, despite the fact that a program to build and renovate public schools would provide both immediate economic stimulus (in the form of construction industry jobs) and long-term social benefit (in the form of improved education). Many school districts across the country have shovel-ready construction projects already planned, but put on hold because of the current economic crisis; the Economic Policy Institute estimates that the House school construction plan would create 150,000 construction jobs.

The Senate stimulus bill reduces key science and technology funding

The Senate version of the stimulus package also reduces House funding for key science and technology projects designed to create jobs for America's educated class and improve our nation's ability to compete in a global economy. 

Despite President Obama's call to create jobs and protect the environment by promoting a new green economy, the Senate plan eliminates $2 billion of stimulus funding outlined in the House stimulus bill for the Department of Energy, meant to support research in advanced physics and alternative energy sources. Not only would $2 billion dollars in DOE funding create numerous jobs for American scientists and engineers— it would also benefit the economy long-term by encouraging the development of alternative energy technologies that could help solve the global climate crisis and eliminate our nation's dependence on foreign oil. 

And Senator John McCain has lead an effort by Republicans in the Senate to reduce stimulus package funding for expanding broadband internet access in underserved communities in the final package. Republicans opposed to broadband funding claim it is unnecessary and not stimulative. Yet, if structured properly to ensure that the funding went mainly to smaller, local service providers ready and willing to expand internet access in their communities, such funding could both create construction and technology jobs in the short term and have a big positive long-term impact on everything from rural patients' access to health care records, to the quality of rural students' education, to small business development in impoverished communities. 

The Senate stimulus plan cuts funding to those who need it most

The Senate version of the bill also eliminates or substantially reduces many aid programs approved in the House stimulus package to help those hardest-hit by the current recession: low-income families and newly unemployed workers.

The House bill would provide COBRA subsidies and extend Medicaid coverage to provide health insurance benefits to unemployed workers currently receiving unemployment benefits. The Senate bill substantially decreases those COBRA subsidies, and removes the Medicaid option for extending health benefits to people on unemployment altogether.

The Senate plan also reduces House funding for housing aid and job training for low-income citizens, and cuts a House increase in funding to the federal food stamp program— this despite the fact that top economists agree that food stamps are actually one of the most economically stimulative forms of government spending, largely because people living in poverty are the most likely to spend any extra aid granted to them immediately to buy things they truly need. According to a study by Moody's, every dollar spent on food stamps returns $1.73 to the economy.

That's even better than the projected return on infrastructure spending, and far, far better than the return predicted for tax cuts. The Moody's economic study indicates, for example, that corporate tax cuts in the stimulus would return just 30 cents to the economy for every taxpayer dollar spent, while making capital gains tax cuts permanent would return 37 cents.

There is still time to encourage Congress to put some of the better House provisions back into the American Recovery and Reinvestment Act. If you are concerned about some of these changes, visit Senate.gov and House.gov to get contact information for your own representatives and email or call them as soon as possible TODAY to express your views.

Comments

[Julie Pippert]

You've outlined my exact concerns. I took some heat (and got some agreement) in my indictment Reich (post below) and his statement about who ought to receive stimulus money.

My concern was and remains that the money will not get to the people.

In a comment at my post, Frank outlined some excellent points to support his disagreement of my POV.

When I thought it through, I realized just how very much it depends upon how your state is doing, who is in charge, and what they will do.

My governor is simply awful, has no interest in funding any of the programs important to me (that you outlined above) and has flat out said he would REJECT stimulus money, including that intended for CHIP, roads and bridges, and schools.

Unfortunately, my Senators (Cornyn and Hutchinson) and my rep (Olson) are not gong to be advocates for me and my POV. I had a call from Olson last night and it's clear he has no interest in any aid.

It's no wonder I don't trust my elected officials to be looking out for the best interests of my community.

Excellent article. I'll call my reps again, although I know they know how I feel (lol) and will ignore me.

Great job.

[Miss Britt]

This is absolutely infuriating to watch as the Republicans take an agenda that this country voted for and rip it to something that will be completely ineffective.

And then they'll say "see, we told you it wouldn't work".

[Tiny marie]

Lord have Mercy...Americans didn't vote for all the pork that's been snuck in these bills. Our Children's Children are going to be furious that we lacked self control. There is junk hiden in every page. Most people are clueless...They wanted change, but not inflation and freebees we can't afford.

History will not smile on this package...It will pass...I'm sure they'll find a way to pass the blame if it fails...Biden is already giving it a 30% chance of failure. Why can't they slow down and come up with a plan that is solid...? We wasted the 1st half of the Fall Stimulus by rushing in...

There were 11 Democrats that had brains...

Sad American...

[Tiny marie]

Dear Julie Pippert,

More than 58 million American people didn't vote for this agenda(Stimulus)...Please don't be "infuriated" when those 58 million don't support it now.

TinyMare

Mr. Obama has the numbers to pass just about anything...But he doesn't have the right to silence 58 million people who disagree with his plan.

[Erica C.]

The comments on blogs like this (and on my own on SVMoms when I wrote about the stimulus) make me scratch my head. Of course many people will disagree with the specifics of this stimulus bill, especially those who are opposed to government spending. Buy what about the fact that so many economists who have made it their life's work to study the economy agree on the fact that massive government spending is needed in this crisis? And they argue that there are better and worse policy options for spending that money in order to create jobs and stimulate demand? These are important matters. So why do people tend to make comments that are snarky one-liners or empty criticisms of Pres. Obama? Anyone who was President of the United States right now would be forced to find ways to stimulate the economy.