Congress struggles to weed out the weaker parts of the stimulus bill.
PRESIDENT OBAMA was back on the hustings Monday, promoting an $800 billion-plus stimulus package at a town meeting in economically distressed Elkhart, Ind. "It is the right size, it is the right scope," Mr. Obama said. Of course, it is still not entirely clear what "it" is. The House has produced an $819 billion plan that emphasizes new federal spending over tax relief. The Senate is working on an $827 billion proposal tilted more toward tax cuts, in order to garner sufficient moderate Republican support to prevent a filibuster. The country won't really know what it's getting until the two chambers hammer out a compromise.
As Mr. Obama said Monday night, a stimulus bill is badly needed, and soon. And the differences between the House and Senate measures are not large. Both would spend $47 billion to extend and slightly increase unemployment benefits; increase spending for food stamps; incorporate Mr. Obama's proposal for a $500-per-worker, $1,000-per-couple tax credit over the next two years; and raise the earned-income tax credit for the working poor. The relative consensus on these points is welcome and not that surprising, since they represent the least controversial examples of short-term, quick-spending aid in the two bills.
Sens. Ben Nelson (D-Neb.) and Susan Collins (R-Maine) worked to scrub some less plausibly stimulative stuff from the Senate bill. But that measure still contains some dubious provisions, especially on the tax side. A $15,000 tax credit for new home purchases this year, which would cost more than $35 billion, looks especially wasteful. The proposal, drafted by Sen. Johnny Isakson (R-Ga.), is supposed to stimulate the moribund housing market. Actually, because it is not limited to first-time homebuyers, the credit would do little to reduce swollen inventories: Homeowners who used this tax break to get a new house would have to put their old one up for sale. The Senate bill would also create an $11 billion deduction for sales taxes on car purchases and auto loan interest, a proposal sponsored by Sen. Barbara Mikulski (D-Md.). It's unclear how many people would be lured into the new-car market, already rich with dealer incentives, by this additional one. Given the modest probable benefits, Congress should cut these provisions and consider devoting at least some of the savings to spending that is likely to provide more immediate bang for the buck.
The Senate bill also includes a $69 billion "patch" for the alternative minimum tax, without which many middle-income taxpayers would face a stiff tax increase. It was probably inevitable that Congress would enact this measure without paying for it this year. But, since the biggest benefits would go to relatively well-off taxpayers unlikely to increase spending, and since AMT relief was probably already factored into household plans for this year anyway, it's hard to see how this belongs in an economic stimulus bill.
Congress is almost at the finish line. Ms. Collins and other moderates have pushed back effectively against some of the more egregious spending provisions in the House bill. Now the conference committee should do the same to a few excessive tax breaks in the Senate bill, and then let Congress promptly send the product to Mr. Obama.