Taxpayer's Tab: Legislative and Spending Spotlight

Vol. 4 Issue 31 September 6, 2013

Legislative and Spending Spotlight: Temporary Stimulus Programs Beyond Max Life

After signing the American Recovery and Reinvestment Act (ARRA) into law in 2009, President Obama observed that opponents of the so-called "stimulus" were skeptical of the $871 billion infusion into an economy in crisis. He said that "we've all seen how quickly good intentions can turn into broken promises and wasteful spending" when it comes to such a complex and massive effort. Yet, as Washington, D.C. gears up for another budget showdown, taxpayers are still facing some of the same challenges that ARRA was designed to stop, prevent, or lessen. Many experts have asked whether or not the "stimulus" was effective but most are not asking a related question: If ARRA programs are not effective, why are taxpayers still funding several of these activities?

By definition a stimulus package, designed to address an immediate economic problem, should be temporary, timely, and targeted. In reality, ARRA was a convenient vehicle to push many proposals into law that had long been on the wish lists of Members of Congress. And now, over four years since enactment, several of these "temporary" programs have already been extended and there are proposals in Congress and in the President's budget to extend them further still.

In this edition of The Taxpayer's Tab, National Taxpayers Union Foundation (NTUF) looks at some of the programs that have continued beyond their original end-date and how Members of Congress are seeking to prolong the lives of these so-called short-term spending efforts.

Targeted Continuation of Programs

The enacted text of ARRA clearly defined the spending level and duration of its programs. Some of the programs highlighted below only had their expiration date extended, while others have been expanded in both scope and funding.

Build America Bonds: Sold as both a job creator and an infrastructure improvement measure, the bond program offered incentives for financial institutions and individuals to agree to new bonds for state governments. The money raised through the bonds would be used to refurbish local roads, utilities, and public buildings at a discounted borrowing rate. In the throes of the recession, officials worried that the bond market would be frozen, leaving states and municipalities with few or no options to finance capital improvement projects. ARRA's provisions cut down the cost of these bonds for governments in two ways. One method was for the federal government to agree to subsidize 24 percent of the interest of the bonds. This would allow states and cities to worry less about long-term repayments. The other method substituted the subsidy for a refundable tax credit, which would be given to the bond issuer. Refundable credits count as new spending because the awarded amounts are in excess of what individuals owe the government in taxes.

Though the program officially ended in December 2010, billions have been spent on interest payment subsidies since and more tax dollars have been requested by both the White House and Congress to continue the program. President Obama requested $23.4 billion to be spent on America Fast Forward bonds, which are similar to Build America, over the 2014-2018 period. Congressman Gerald Connolly (D-VA) has sponsored the Put America Back to Work Act (H.R. 535) and Congressman Richard Neal (D-MA) has sponsored the Build America Bonds Act of 2013 (H.R. 789), both of which would make the Bonds permanent at a possible annual cost of $2.2 billion each year (as scored by NTUF).

Supplemental Nutrition Assistance Program (SNAP): As the recession deepened and unemployment rose, more Americans became eligible for SNAP benefits (formerly known as "food stamps"). These payouts are intended not to entirely replace a household's food budget, but merely subsidize a portion of what families spend on food. A temporary increase in SNAP funding of 13.6 percent was included in the "stimulus" bill, which added an additional $20 to $24 for each recipient per month from 2009 to 2011 and by lesser amounts in 2012-2013.

After November 2013, SNAP spending is scheduled to return to historically "normal" spending levels. However, President Obama has requested that SNAP funding remain at the heightened levels, proposing in his budget $2.2 billion in FY 2014 and $41 million the following year. Earlier this year, the Senate included continued SNAP spending whereas the House did not in their respective farm bills.

Recovery Accountability and Transparency Board: Designed to oversee the billions of ARRA tax dollars being spent across the country, the Board's mission was to prevent waste, fraud, and abuse while detailing "stimulus" spending through their website. The Board was scheduled to cease activities at the end of September of this year.

In passing the Disaster Relief Appropriations Act of 2013 in response to Hurricane Sandy, Congress extended the life of the Board through 2015 to oversee recovery spending. That extension amounted to a $12.5 million request for FY 2014. The Financial Services and General Government Appropriations Act, 2014 (H.R. 2786/S. 1371) also requested that the Board's funding be extended but at a $20 million level for 2014.1

Has the Timeliness Passed?

"Nothing is so permanent as a temporary government program."
- Milton Friedman

Using the Administration's measures, the American economy has begun to lift itself out of recession and is making up ground, albeit slowly. Unemployment, though not as low as promised by the advocates of ARRA, is lower than it was at the height of the recession. Other indicators, such as stock market performance, are improving as well. Yet programs such as those highlighted above that were established or temporarily expanded in the "stimulus" bill still exist and continue to receive significant taxpayer funding. Attempts to further extend welfare assistance programs such as the SNAP expansion demonstrate the weak impact that ARRA had on the economy, while efforts to extend infrastructure spending is a continuation of policies that have proved ineffective at generating long-term, sustainable economic growth.

What's more, some of these programs exist under the radar and the fact that they are still in the budget despite being passed as temporary remedies receives little attention. They have been permitted to morph into expensive, long-term spending projects. The likelihood that this would happen was a concern when the "stimulus" bill was being drafted. One could argue that ARRA had more of a stimulative effect on the government than it had on the economy.

The programs highlighted above -- just three among several thriving "temporary" programs -- represent $2.9 billion that could otherwise be devoted to deficit reduction or even returned to taxpayers.

1H.R. 2786 was not scored by NTUF because, according to BillTally methodology, appropriations bills are not applicable.

Photo Credits: LA Times, Heritage,


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About NTUF

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