One More Sign That the Stimulus Traded Infrastructure for Tax Cuts

The independent Congressional Budget Office (CBO) released an economic analysis of the Obama administration’s stimulus law this week, and one chart in particular (see below right, or a larger version here) is getting a lot of attention from bloggers, including Ezra Klein and Ryan Avent

cbo_chart.png(Image: CBO)

The chart’s message, simply put: the elements of the $787 billion bill that had the biggest bang for the buck were aid for state and local infrastructure projects and purchases by the federal government.

Yet the stimulus’ infrastructure provision, at $44 billion, was half the size of the $88 billion investment in federal purchasing programs.

And looking further down the list, the "one-year tax cut for higher-income people" — a.k.a. the alternative minimum tax (AMT) adjustment — jumps out as one of the recovery law’s biggest mistakes.

The AMT, which Congress neglected to index for inflation years ago, is adjusted every year to shield upper-middle-class families from higher tax bills. It’s one of those "must-pass" moves, as this Democratic  release puts it, that never fail to get done.

But the AMT fix was added to the stimulus, at a cost of $70 billion, largely thanks to the efforts of Sen. Charles Grassley (R-IA), who promptly voted against the bill — and later calling his state "fortunate" to be getting infrastructure aid.

The House never added an AMT fix to its stimulus bill, but transport committee chairman Jim Oberstar (D-MN) was displeased with the White House’s decision to cut infrastructure provisions in favor of more tax breaks. As the CBO chart shows, those tax cuts also had a smaller economic multiplier effect than transportation spending.

As congressional Democrats craft another round of economic recovery legislation, they may well have learned the lesson from this winter’s stimulus trade-offs. Still, even if infrastructure spending becomes a major focus of the coming jobs bill, it remains to be seen whether the money will be allocated through an actual merit-based process.

ALSO ON STREETSBLOG

The State of American Infrastructure Spending in Four Charts

|
If you’ve checked the news on the subject of American transportation infrastructure lately, you’ve probably heard that the sky is falling. It’s true that Congress can’t get its act together and pass a decent transportation bill, but the amount of money that’s being spent isn’t the problem so much as the fact that we’re spending it […]

CBO Echoes Obama’s Candor on the Pitfalls of ‘Shovel-Readiness’

|
During last month’s White House jobs summit, President Obama carved out some common ground with critics of his first stimulus law’s $47 billion in infrastructure spending — which was distributed mainly by the book through state DOTs. "The term "shovel-ready," let’s be honest here, doesn’t always live up to its billing," he acknowledged. The CBO […]

With or Without Tougher CAFE Rules, Today’s Gas Tax Is Unsustainable

|
Would stricter fuel economy rules bankrupt transportation funding in America? The Congressional Budget Office seems to think so, but environmentalists are quick to say that the system was hurtling toward bankruptcy anyway. Under a new rule proposed by the NHTSA and the EPA, CAFE standards are expected to raise the average fuel economy of the new-vehicle […]

Sober Non-Partisan Analysis: America Wastes a Ton of Money on Highways

|
A good deal of the $46 billion the federal government pours into highway spending each year is going to waste, according to a new Congressional Budget Office report [PDF]. The conclusion won’t surprise regular Streetsblog readers, but it’s the source that’s interesting. The CBO is not an advocacy group or an ideologically-minded think tank. It’s a non-partisan budget watchdog charged […]

Bike-Ped Funding Dips as Stimulus Spending Slows

|
Via the League of American Bicyclists, new information is out about how much the feds are spending on bike-ped  projects. While federal funding for bicycle and pedestrian projects is down a bit from last year’s all-time high, it still comes in at more than a billion dollars. A third of the money is from the American […]