Republican vice presidential candidate Paul Ryan was once an enthusiastic supporter of short-term government stimulus—when it focused overwhelmingly on tax cuts, that is.
MSNBC’s “Up with Chris Hayes” dug up a February 2002 clip of Ryan vocally supporting a stimulus package under President Bush, which was signed into law in March 2002 and included extended unemployment benefits along with tax cuts. “What we’re trying to accomplish today with the passage of this third stimulus package is to create jobs and help the unemployed,” Ryan said on the House floor.
Liberal media outlets have suggested that the revelation reeks of hypocrisy, given Ryan’s vehement opposition to President Obama’s 2009 stimulus. They rightly point out that the Wisconsin congressman has recently voted against extending unemployment insurance in the Obama years—benefits that were part of the 2002 Bush stimulus.
But most of the 2002 stimulus that Ryan supported, in fact, is largely in line with ideology today. The Bush stimulus was distinct from Obama’s not only because it was far smaller, but also because it focused predominantly on tax cuts for businesses, as opposed to aid for states and ordinary households. And while Ryan recently has opposed extending unemployment insurance, he voted for earlier extensions of those benefits in October 2008 and September 2009.
Bush’s 2002 stimulus bill cost $42 billion over 10 years, according to the Congressional Budget Office, and it was intended to help the economy recover in the wake of the Sept. 11, 2001 terrorist attacks. Under pressure from Democrats, Bush and the Republicans agreed to include about $12 billion for an unemployment insurance extension, as well as $319 million in welfare benefits, the CBO’s report says.
But the rest of Bush’s 2002 stimulus—about 70 percent of the total—was dedicated to business tax breaks. The biggest piece temporarily raised the amount that businesses could write-off for buying new machines, equipment and other assets, known as “bonus depreciation.” The 2002 stimulus also included a $5 billion tax credit for New York City businesses forced to relocate because of the terrorist attacks, and extended tax breaks for electric cars, welfare-to-work and other provisions.
By contrast, Obama’s 2009 stimulus was an order of magnitude larger and it flipped the ratio of tax breaks to spending: About $290 billion, or 36 percent, of the $787 billion package was devoted to tax cuts, while the rest was spending. And the vast majority of the tax cuts in Obama’s stimulus helped ordinary households and low-income Americans, rather than businesses.
The difference helps explain why Bush’s 2002 stimulus wasn’t as effective in boosting in the economy as Obama’s stimulus package, which most economic studies agree has worked. According to the Tax Policy Center, Bush’s plan’s “bonus depreciation” for businesses “provid[ed] little incentive for uncertain companies to hasten purchases,” as it was in place until summer 2004 and was then extended thereafter.
Economists from the University of Michigan agreed that the impact of Bush’s 2002 tax stimulus was “modest” at best. “The recent tax cuts were well-timed, but poorly structured for short-term stimulus,” added Brookings’ William Gale and Peter Orszag, evaluating both the 2001 Bush tax cuts and the 2002 stimulus. “The tax cuts were mostly backloaded and did not channel funds towards groups with the highest marginal propensity to consume additional resources.”
By contrast, numerous economic studies have shown that Obama’s stimulus was successful in part because it focused so heavily on spending that the 2002 Bush stimulus didn’t touch, like infrastructure spending, fiscal aid to states and tax cuts to low-income households.
So Ryan didn’t completely contradict himself by supporting Bush’s 2002 stimulus while rejecting Obama’s 2009 package, which were strikingly different in size and substance. But that doesn’t mean that Ryan’s policy reasons for rejecting Obama’s stimulus were 100 percent sound, either.