House Leaders Ready to Start in Stimulus Package (1/25/2008)

On Thursday, House leaders unveiled the framework for a $150 billion economic stimulus package, intended to boost consumer spending and confidence. Although the legislation’s immediate focus is turning around a stagnant economy, its effects will impact the appropriations work for fiscal year 2009 (FY09) and beyond. The details of the stimulus package seem to signal a possible year-long suspension to the highly touted “Pay Go” rule in Congress.

During the 2006 midterm election, the Democratic minority continually lobbed criticisms at the Republican majority regarding spending on new programs without equitable offsets in other areas. When the Democrats took control last year, their first order of business was instituting a rule that required offsets for any new payments, known as the Pay Go rule. Despite its initial popularity, the rule was waived a number of times to accommodate a number of legislative priorities.
Now, under the umbrella of trying to ward off recession, Congress is getting ready to pass a large fiscal bill without any major offsets, setting a precedent for the year that has some fiscal conservatives worried.

By waiving the Pay Go rule so early in the legislative session, Congress may be even more willing to keep the rule off the table, especially regarding FY09 appropriations. All work on appropriations this year will be in reference to the stimulus package, therefore Congressional leaders may continue to operate under the assumption that Pay Go is not necessary, since all efforts are going towards stimulating the economy.

Although the President has unofficially signed off on the legislation, the bipartisan effort that has brought the stimulus package to this point is not likely to continue once appropriators start their work later this year. When the President releases his budget on February 4th, his request is not expected to increase from previous years. Some Democrats fear that his budget request may be even tighter than before.

Traditionally, a budget request in the last year of a President’s term tends to act as more of a policy statement than any other year in his term. Lately, the Administration’s policy fights have centered on keeping the Democratic-controlled Congress from over spending. As such, the President’s FY09 request could be billions below previous years, especially in light of his signing off on a $150 billion stimulus package.

Although actual language is not currently in place, Speaker of the House Nancy Pelosi (D-CA), along with House Minority leader John Boehner (R-OH), laid out the general highlights of the bill, including tax rebates for all levels of income earners. The bill also includes a number of business oriented tax cuts. In recent weeks, some lawmakers discussed the possibility of adding funds for school construction and repair as part of the economic stimulus package. No such funding is included in the highlights from Speaker Pelosi, but might be added during the bill’s trip through both chambers of Congress.

The Senate, for example, expects to make significant additions to the bill, focusing more on supporting businesses and lowering the unemployment rate, rather than individual tax payers. Experts claim that school construction and repair will lead to as many as one million new jobs over the next year, which would fit in with Senate objectives.

Speaker Pelosi expects to bypass the committee process and bring the bill to the House floor as early as next Tuesday. Most Democrats and a good number of Republicans have already signed on to support the bill, so the House should clear the package without much of a fight next week. Senate Majority Leader Harry Reid plans to have the bill in hand by the first week in February.

The Senate may spend considerably more time on the bill, adding on various provisions aimed at further stimulating the economy. Once the House agrees to those changes, the President expects to sign the bill, quite possibly having the whole process finished before March. Once the stimulus package is signed, Congress will get the ball rolling on the FY09 budget resolution, starting a new cycle of partisan squabbling.

Resources:
Jennifer Bendery, “Pelosi Details Costs of $150 Billion Economic Stimulus Plan,” Congress Now, January 24, 2008.
Richard Rubin, “Senate Considers Adding to Stimulus,” CQ Today, January 24, 2008.
Author: SAS