Obama's Economic Recovery Plan Is Almost As Pure As Ivory Soap

The following is written by my Campaign for America's Future colleague Bernie Horn, and was originally posted at OurFuture.org.

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There's been a lot of bitching and moaning in the progressive blogosphere about the huge business tax cuts that are supposed to be contained in President Obama's economic recovery plan.

In fairness to all, the negotiations took place behind closed doors, leaving us little solid information on which to base opinions. And over the years, we've had good reason to be wary of backroom deals in Congress.

But there's good news. The American Recovery and Reinvestment Act is a remarkably "clean" bill. Only between 1½ and 3 percent is being wasted on tax cuts for business. Put another way, the bill is about 98 percent pure -- money dedicated to good, progressive causes.

The Congressional Budget Office (CBO) analysis, released Monday, says the business tax cuts will cause "a net revenue loss of $13 billion over the 2009-2019 period." See the discussion on pages 11-12 of this document.

The figure of $13 billion is confirmed and explained by the House Ways and Means Committee on pages 2-3 in this document. There are only three business tax provisions that have a significant price tag.

First, the extension of bonus depreciation enacted last year, allowing businesses to depreciate capital costs faster than the ordinary schedule, will cost $5 billion. Second, the 5-year carryback provision, allowing businesses to deduct net losses from the last five years instead of the last two, will cost $15 billion. Third, the repeal of a Bush Treasury Department ruling that unjustly benefits the purchasers of certain companies will increase revenues by $7 billion. So $20 billion in business tax cuts are offset by a $7 billion tax increase, leaving a total of $13 billion in benefits.

As you probably know, the Senate Finance Committee intends to make larger business tax cuts than the House bill has. The analysis of the Finance Committee's markup, evaluated by the Congressional Joint Committee on Taxation, is on page 3 of this document. The Senate version includes both the bonus depreciation and 5-year carryback provisions, but the Joint Committee estimates these will cost a total of $22.5 billion instead of the House's $20 billion. The Senate does not include the $7 billion tax increase and adds a bit more than $2 billion more in tax breaks for a total of $24.9 billion in business tax benefits.

The CBO tells us that the whole bill costs $816 billion. So if the Senate version is adopted, only 3 percent of the spending is for business tax breaks. If the House version is adopted, it's only 1½ percent. Either way, this is a bill that is between 97 and 98.5 percent targeted toward good causes.

In our nation's capital, no major bill ever passes without a "sweetener" for the special interests you may oppose. By Capitol Hill standards, this is an exceptionally modest sweetener. And don't think it's necessarily being done to gain Republican votes -- key Democrats want these too.

The bottom line: This is the biggest and boldest progressive legislation in 40 years. By all means, register your complaints against the business tax cuts. But don't let that dampen your enthusiasm for the overall measure. If you live in a state with a Republican or less-than-liberal Democratic Senator, call them today and urge them to support this bill. You'll be sorry if you don't help out, because this is history in the making.

Bernie Horn is a Senior Fellow at Campaign for America's Future and author of the recent book, Framing the Future: How Progressive Values Can Win Elections and Influence People.

Comments

[bassnman]

Show me one time in history where tax hikes helped an economy grow? Keep raising taxes on business here and the companies will continue to move overseas as well as your jobs.

When Japan was having economic troubles all our financial recommendations to them were to cut spending and lower taxes. Now to help our economy we want to do the exact opposite. How does this work? Why do we always do the opposite of what we tell others to do?

[bkbigfish]

Or, put it another way...... the bill is about 98percent having nothing to do with stimulus and everything to do with passing the liberals' dream projects. That's why Obama is trying to hurry like hell to push this thru, before anybody can ask anymore embarassing questions.

At least this author is honest......he doesn't pretend that this bill is anything but what it is, a liberal's wet dream. And they know they can pass it because they scare the hell out of the people, telling them that it is imperative to pass this "stimulus" bill. They know the opportunity is ripe because otherwise, they'd never be able to vote this in on it's own merit.

[TomTheAlmostUgly]

"liberals' dream projects."

Jobs, healthy Americans, education for all -- you're right, all pie-in-the-sky, useless stuff.

Much better to spend our tax dollars to enable fatcats to buy fifty-mill­ion-dollar French airplanes.

[BBackSoon]

A remarkably clean bill? Not if you listen to almost any of the news or opinion shows.

The Republicans are on a serious anti-Obama-stimulus media push. And far too many people are swallowing their bile yet again.

[MossyOak]

I've posted this question elsewhere to no avail... While I didn't read the entire text of H.R.1, I scanned it pretty well and nowhere do I see anything resembling a bridge between now and when these jobs start making their way toward us. I'm talking interest rate rollbacks on debt, significant tax rebates... this kind of stuff. Why is it acceptable to give banks billions of dollars but nothing for the American people but work, work and more work? Yes, there is the $500 per family tax rebate... Bush tried this and it was a dismal failure like everything else he did, and tax breaks only work when you're making money.

I wrote my senator, the White House, posted this question on other blogs, and no response whatsoever from anyone. Am I in need of a mental health counselor? If so, I'll look into that right after I get out of the unemployment office.

[BBackSoon]

I agree. If we only get jobs but CEO’s get bonuses for doing bad jobs that tells us what we are worth.

[Danigirl65]

Why is it that everyone lumps small business into "BUSINESS?" If you read the stimulus bill, a good portion of the tax cuts are for small business. If a lot of small businesses are like my family's company (we employ 7 people) we warmly welcome some help. Government has ignored us for years!!

[BillZBubb]

What are the TOTAL tax cuts, not just the business tax cuts? There should be few if any tax cuts in this stimulus package. Tax cuts simply are not effective in getting an economy moving quickly. Any general tax cuts feed into the disproven Republican myth that tax cuts can get the economy to rebound.

DIrect spending targeted to high "multiplier" areas is the way to go. Any tax cuts are a sop to the Republicans and hurt the economic effort more than they help.

[IGNSTHMD]

yeah.. what he said... and what will this stimulus package do anyway, I mean, what are we gunna have to show for it, and when do we get to the jobs.

[ECBA88]

Middle-class tax cuts are also an important Obama campaign promise. They may not be the best thing for the economy, but plenty of people voted for President Obama expecting them.