Less for the Same Price
I remember back several years ago when a half gallon (64 Oz.) of ice cream cost $2.50 on sale and an 8 oz. (giant size) Hershey bar cost $1.00, also on sale. Today I still can buy ice cream on sale for $2.50 and a giant Hershey bar for $1.00. The difference is the ice cream now is 48 Oz. and the Hershey bar is 4.5 Oz. Funny thing is they both look like the same size as the older products. This is getting less for the same money disguised as getting the same thing.
So the economic recovery act comes out of the House of Representatives at a cost of $819 billion and comes out of the Senate at $827 billion dollars but only gives us $757 billion in value, 7.5% less for 10% more in cost.
There is one major item in the Senate bill that accomplishes this slight of hand. There are other things in the Senate bill that contribute to this phenomenon, but the one major contributor to it is the Senate provision to fix the Alternative Minimum Tax (AMT) problem which year after year now has been attempting to eat away at the middle class since the act passed, mostly due to inflation.
I say attempting to eat away at the middle class because every year the congress has taken action to forestall this by applying a temporary fix for the current year. Why has the congress not acted to put in a permanent fix? The answer is that a permanent fix would involve making the fix revenue neutral by accounting for the 10 year cost of the fix; a sum of $800 billion ($800,000,000,000) to $1 trillion ($1,000,000,000,000). The single year cost for the 2009 temporary fix is only $70 billion. Thus the permanent fix is never done, kicking the can down the road as it becomes more and more expensive to fix each year.¹
Putting the temporary one year cost of the AMT fix into the Economic Recovery Act, the $70 billion can be written off as part of the stimulus cost and not be accounted for in the annual budget to maintain revenue neutrality. But this is a cost that in the past several years has been included as part of the annual budget and should and would be included as part of the 2009 year budget if not included in the stimulus plan.
The over the top rhetoric by the Republicans about the evil of including other budgetary items in the stimulus that would normally normal have to be accounted for in the annual budget is shown for what it is; a sham just to attack the bill, the Democrats and the President.
The net result is that the $827 billion dollar cost of the Senate bill only delivers $757 billion in value. Hence, less for the same price.
¹For a more detailed discussion of the AMT kabuki act going back to how it was used in justifying the 2001-2003 Bush tax cuts see:
Myths and Realities About the Alternative Minimum Tax
So the economic recovery act comes out of the House of Representatives at a cost of $819 billion and comes out of the Senate at $827 billion dollars but only gives us $757 billion in value, 7.5% less for 10% more in cost.
There is one major item in the Senate bill that accomplishes this slight of hand. There are other things in the Senate bill that contribute to this phenomenon, but the one major contributor to it is the Senate provision to fix the Alternative Minimum Tax (AMT) problem which year after year now has been attempting to eat away at the middle class since the act passed, mostly due to inflation.
I say attempting to eat away at the middle class because every year the congress has taken action to forestall this by applying a temporary fix for the current year. Why has the congress not acted to put in a permanent fix? The answer is that a permanent fix would involve making the fix revenue neutral by accounting for the 10 year cost of the fix; a sum of $800 billion ($800,000,000,000) to $1 trillion ($1,000,000,000,000). The single year cost for the 2009 temporary fix is only $70 billion. Thus the permanent fix is never done, kicking the can down the road as it becomes more and more expensive to fix each year.¹
Putting the temporary one year cost of the AMT fix into the Economic Recovery Act, the $70 billion can be written off as part of the stimulus cost and not be accounted for in the annual budget to maintain revenue neutrality. But this is a cost that in the past several years has been included as part of the annual budget and should and would be included as part of the 2009 year budget if not included in the stimulus plan.
The over the top rhetoric by the Republicans about the evil of including other budgetary items in the stimulus that would normally normal have to be accounted for in the annual budget is shown for what it is; a sham just to attack the bill, the Democrats and the President.
The net result is that the $827 billion dollar cost of the Senate bill only delivers $757 billion in value. Hence, less for the same price.
¹For a more detailed discussion of the AMT kabuki act going back to how it was used in justifying the 2001-2003 Bush tax cuts see:
Myths and Realities About the Alternative Minimum Tax
posted by Michael | 12:04 AM
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