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Smoke and Mirrors: Discretionary Spending Freeze Savings Partially Offset by Higher Stimulus Costs

Leonard Gilroy
January 27, 2010, 7:15am

If The Wall Street Journal's excellent editorial today isn't enough, then the Houston Chronicle offers another reason to be very, very underwhelmed by the Obama administration's proposed partial spending freeze, expected to be announced in the SOTU tonight (emphasis mine):

Last year's $787 billion economic stimulus bill is going to be even more expensive — $75 billion more.

The new Congressional Budget Office estimate, released Tuesday, provides more ammunition for Republicans who say the stimulus has been long on spending and short on creating promised jobs. The additional cost also eats into the savings forecast from the budget freeze President Barack Obama is expected to propose Wednesday night during his State of the Union address.

Almost half of the additional cost, $34 billion, is because the food stamp program won’t be able to take advantage of lower-than-expected inflation rates and will instead have benefits set by the stimulus bill.

Higher unemployment insurance costs added $21 billion to the bill, and stimulus-subsidized bonds to pay for infrastructure projects have proven more popular than expected with state and local governments.

The $75 billion increase would erase one-third of the $250 billion in 10-year savings that would come from the partial domestic spending freeze being proposed by Obama. The boost in unemployment payments alone would more than erase the $10 billion to $15 billion in first-year savings from such a freeze.

Leonard Gilroy is Director of Government Reform


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