POLITICS
03/02/2009 05:12 am ET Updated May 25, 2011

The Very Strange Bedfellows Of The Stimulus Package

One of the biggest winners in the $825 billion Economic Stimulus Bill moving through Congress is the "hard hat lobby," the alliance known as the Buy America Coalition made up of the American Iron and Steel Institute, the Committee on Pipe and Tube Imports, the National Steel Bridge Alliance, and the Steel Manufacturers Association.

The past 40 years have been devastating to the once proud and powerful steel industry and, as part of its continuing struggle to win back markets lost to overseas competitors, the Buy America Coalition has won inclusion of a tough protectionist amendment in the House bill declaring:

"None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron and steel used in the project is produced in the United States."

If enacted as part of the final version of the bill, the Buy American provision has explosive potential that has received very little consideration as Congress is attempting to act as fast as possible on a measure involving huge sums with wide-ranging policy consequences.

Major exporting companies like General Electric and Caterpillar argue that the amendment is the opening gun in a trade war, similar to the enactment of the Smoot-Hawley Tariff Act on June 17,1930, raising import duties to record levels on nearly 1,000 goods ranging from milk, to shoes to pig-iron.

The State Department describes the Smoot-Hawley tariff as

"a symbol of the 'beggar-thy-neighbor' policies of the 1930s. Such policies, which were adopted by many countries during this time, contributed to a drastic contraction of international trade. For example, U.S. imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Overall, world trade declined by some 66% between 1929 and 1934."


An alliance of major American business associations that includes the Aerospace Industries Association, the Associated Builders and Contractors, the Business Roundtable, and the U.S. Chamber of Commerce adamantly opposes the buy American provision. In a letter to Congressional leaders, the association warned that the legislation would

"shut U.S. companies and their workers out of the economic stimulus programs being initiated around the world. Inclusion of new trade-restrictive proposals would send precisely the wrong signal to governments around the world that are undertaking their own economic stimulus programs.....At a time when American exports are one of the few bright spots of the U.S. economy and markets are weakening overseas, the U.S. Congress should be taking actions to promote U.S. exports, not undermine them."

The American Iron and Steel Institute countered:

"By requiring the use of American-made steel products in these federal construction projects, along with other important federally supported projects, this legislation will help to ensure that our national infrastructure is made with quality domestic steel products. Furthermore, the use of these steel products will create greater economic prosperity for American steelworkers and steel communities across the nation."

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For a politician, perhaps the most serendipitous moment comes when you can do good while doing well.

For Congressman Chris Van Hollen, the reform-minded representative of Maryland's Montgomery County and chair of the Democratic Congressional Campaign Committee, that moment came during the January 22 House Ways and Means Committee mark-up of the $825 billion economic stimulus bill. Van Hollen proposed and won easy approval, of what's known in the politics trade as a 'motherhood amendment': a provision putting off for one year reductions in Medicare payments to the nation's hospices -- where men and women seek final comfort as they prepare to die.

Who could be against legislation helping to insure that voters' and their parents expire in caring hands?

And then the amendment does something else: it helps out one of the major hospice chains, VITAS Innovative Hospice Care, which claims to be the "nation's largest provider of end-of-life care."

VITAS, in turn, is very helpful on another front: its employees give a lot of money to political candidates and committees, almost exclusively to Democrats.

Data compiled by the Center for Responsive Politics for the 2004, 2006, and 2008 election cycles shows that officers and staff of VITAS contributed a total of $335,600, of which $324,600, or 96.7 percent, went to Democratic recipients.

And the biggest chunk of change, $139,800, went to -- surprise -- Van Hollen's Democratic Congressional Campaign Committee. Some observers of the legislative process privately questioned what the Van Hollen amendment was doing in an economic stimulus bill, but Van Hollen spokesman Doug Thornell contended: "This is exactly the sort of bi-partisan measure that should be included in the recovery and reinvestment plan. It protects jobs, invests in healthcare, and preserves access to quality end of life care for over a million terminally ill Americans."

According to Van Hollen's staff, if no action were taken to delay the reductions in Medicare hospice payments, "about 8,700 jobs will be lost" with reduced "services and access for more than 1.4 million Americans who seek compassionate end-of-life care from hospices each year."

The hospice industry and the DCCC emerge from this as winners, leaving the U.S. Treasury with the responsibility of picking up the $134 million cost of the one year postponement.

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Duke Energy and the Southern Company, two energy giants, don't much like Democrats. And Democrats don't much like them.

In every election cycle since the GOP took over the House and Senate in 1994, campaign contributions from Southern and Duke executives and the company PACs have tilted in favor of Republicans by three to one, and sometimes by nearly five to one. The pattern changed only slightly after the Democrats took back the majority: in 2008, Southern executives gave $746,021, or 68 percent of their total contributions, to Republicans and $352,131, or 32 percent to Democrats, according to the Center for Responsive Politics.

With this track record, an observer might think that Democrats would use every possible opportunity to stick a legislative knife into the backs of these two mega-utilities. If fact, however, the House Energy and Commerce Committee, under the guidance of the super-Democratic, super-environmentalist chair, Henry Waxman, gave the utilities a big and very wet kiss during its mark-up last week of the $825 billion stimulus bill.

Waxman proposed, and the Democratic majority backed, a measure to financially encourage state regulators to "decouple" utility profits from energy usage. Decoupling would replace the most common system of regulation that penalizes utilities that promote energy-saving steps because utility profits are directly tied to increases in consumption. Decoupling ensures that if sales drop, "then a slightly upward adjustment in rates is applied to compensate the utility," according to a study conducted by the American Council for an Energy Efficient Economy.

Republicans suggested that it was ironic that Democrats on the Energy and Commerce Committee were promoting environmental legislation that purposely seeks to prevent any financial harm to the utility industry. Rep. John Shimkus (R-Ill.) said, "This is the first time I have heard Democrats trust an electric utility in my 12 years."

Rep. Jay Inslee (D-Wash.) defended decoupling, arguing that in the few states where it has been adopted, including California, it "has been the single most important policy to reduce usage of electricity in America."

A coalition of odd couples almost as unexpected as Democrats and the utility industry -- the Alliance to Save Energy, the American Gas Association, the Edison Electric Institute and the Natural Resources Defense Council -- has endorsed decoupling, Waxman told his colleagues on the panel.

If all goes according to plan -- a big if, although environmentalists contend that decoupling has been a major success in California -- the utilities get to paint themselves green with no bottom line costs, the citizenry gets cleaner air, the country becomes less energy dependent on unreliable foreign governments, and, miracle of miracles, Duke and Southern Co. might abandon their love affair with the GOP and jump into the welcoming arms of the Democratic Party.