WASHINGTON – In rushing to pull together a landmark economic stimulus package last week, Democratic lawmakers and the White House added billions in new spending and tax breaks that will benefit a handful of specific companies and industries.
The final bill, approved by Congress on Friday, includes $8 billion in unplanned spending specifically requested by President Barack Obama for regional high-speed rail projects, according to administration officials. New language sought by General Motors will save the beleaguered Detroit automaker from paying up to $10 billion in taxes related to its acceptance of federal bailout funds.
Democratic lawmakers from Wisconsin and Indiana helped make buyers of motorcycles and recreational vehicles eligible for a tax credit aimed primarily at automobile and truck purchasers. Officials said the measure will primarily benefit Milwaukee-based Harley-Davidson and RV manufacturers in Elkhart, Ind., where Obama held a town hall meeting last week as part of his campaign to push the stimulus.
These and other changes in the final days of negotiations underscore the hectic and often secretive nature of the crafting of the $787 billion package, which barreled through Congress in three weeks. The White House announced Saturday that Obama will sign it into law Tuesday.
Republicans – all but three of whom opposed the bill – accused Democrats of going on a “spending spree” and have identified $25 billion in narrow provisions that they deem “questionable or non-stimulative.” Sen. Tom Coburn, R-Okla., one of the leading opponents, said Congress had “reverted to its bad habit of larding up bills with special-interest pork projects that stimulate re-election campaigns rather than the economy.”
Democrats have fired back at such criticism, arguing that the stimulus will put in place an unprecedented level of oversight to ensure that the money is spent efficiently and fairly. “They trash by trivializing,” said Rep. David Obey, D-Wis., chairman of the House Appropriations Committee.
Under the stimulus legislation, purchasers this year of new cars, light trucks, motor homes and motorcycles will be able to deduct the vehicle’s sales tax, a provision with an estimated cost of $1.7 billion. Including RVs and motorcycles added about $100 million to the cost, according to estimates by the congressional Joint Committee on Taxation.
Harley-Davidson announced last month that it planned to cut 1,100 jobs in Wisconsin, Missouri and Pennsylvania. Lawmakers from those states – including Wisconsin’s Democratic senators, Russell Feingold and Herb Kohl – pushed hard to add the tax break last week.
“The recent news about layoffs at Harley-Davidson was a painful sign of how the economic downturn is affecting Wisconsin,” Feingold said.
In Elkhart, proponents say the tax credit for RV sales will help stem a tide of job losses that has pushed unemployment over 15 percent. “RVs are the lifeblood of our area,” said Rep. Joe Donnelly, D-Ind. “This provision will help stimulate demand and put folks back to work.”
The largest single item to be added to the package in the final negotiations was an $8 billion investment fund for building high-speed rail. This cheered rail advocates, who had been perplexed about why the package had included relatively little for rail and mass transit, despite Obama’s and other Democratic leaders’ stated support for investing more in those forms of transportation as a way to reduce the country’s dependence on fossil fuels.
The original House stimulus package, drafted with the guidance of the White House, had less than $10 billion for mass-transit systems – a third as much as for roads and highways – and about $1 billion for Amtrak upkeep, with no money for new high-speed rail. Pressed on this, White House advisers said major rail projects would take too long to get under way to justify them as short-term stimulus.
Then the $8 billion line materialized in conference committee negotiations. White House chief of staff Rahm Emanuel told reporters Friday that the item was added at the president’s request because it met his criteria for stimulus spending. Emanuel did not explain why the item would now meet those criteria when it did not before.
“There was a decision to introduce it there in the conference,” Emanuel said, adding: “It was an idea we thought of after the fact.”
Republicans regard the provision as a barely disguised earmark for a proposed magnetic-levitation rail line from Las Vegas to Disneyland, in California, championed by Senate Majority Leader Harry Reid, D-Nev. But Democrats said 11 proposed high-rail corridors throughout the country would all have to compete for the money.
The GM language emerged after the automaker warned that several conditions in its $13.4 billion loan agreement with the federal government could trigger tax liabilities of between $7 billion and $10 billion. As a result, the company argued, it might have to devote a large portion of its loan to paying taxes.
The new language clarifies that the relevant tax provisions do not apply to companies participating in the Troubled Asset Relief Program, officials said.
The political parties fought over words as well as numbers. For example, Democrats removed GOP language added in the Senate that would have barred the use of stimulus funds for stadiums, community parks, art centers, museums and highway beautification. The bill does forbid localities from using stimulus funds for casinos, aquariums, zoos, golf courses and swimming pools, but the federal government is not bound by the rule.
Sen. Charles Grassley of Iowa, the ranking Republican on the Senate Finance Committee, railed against a provision that he said would undermine the independence of watchdog agencies within the government. The bill sets up a new panel, the Recovery Accountability and Transparency Board, which has the authority to request “that an inspector general conduct or refrain from conducting an audit or investigation.”
“Any new limitation on the independence of inspectors general is dangerous,” Grassley said.