Hitching a Ride on the Stimulus Train

This will surprise nobody who follows what is optimistically called the budget process, but the economic stimulus package wending its way through Congress has become the vehicle for an astonishing array of stuff.  It’s become even better than emergency supplemental appropriations, which have been used to fund decidedly predictable items, like the decennial census and continuing outlays for the Iraq war (long after the initial shock and awe had worn off).

The census is the most predictable of expenditures.  We’ve been doing it every ten years since 1790.  It is not an emergency.  Katrina was an emergency.  9/11 was an emergency.  The census is not.  But somehow it caught legislators by surprise in 2000.

This year, census funding is not an emergency, but “economic stimulus.” Huh???  We have to do the census.  It’s in the Constitution!  But, apparently, we don’t have to do it well.  So adequate funding would be a job-creating boost to the economy (not to mention all the research and measurement that depends on the data), as my Urban Institute colleague Rob Santos explains.  Apparently, our “data infrastructure” is crumbling just like our bridges and highways so the proposal may be enabling essential spending that would not occur otherwise.

Now, it turns out that another perennial has hitched a ride on the stimulus bill: Patching the AMT. Unlike the census, which has no public constituency, the AMT is always patched because 30 million angry Americans would howl in protest if it weren’t. But the annual fix was shoe-horned into the Senate fiscal relief bill Tuesday afternoon anyway.

Don’t get me wrong.  I hate the AMT.  It’s pointlessly complex, inefficient, and unfair.  Every year we patch it (temporarily increase the exemption levels) in a bizarre game of tax policy chicken.  Its purported revenue (roughly 1 trillion dollars over the next ten years) masks the depths of our looming budget challenges and makes further income tax cuts look more affordable than they really are.  We should follow the advice of President Bush’s tax reform panel and repeal the AMT while broadening the regular income tax base to offset the revenue losses.  Or just replace it with a simpler alternative

Of course, we won’t do either anytime soon.  We’ll continue to patch the AMT—as predictably as we fund the decennial census. 

The patch may be a necessary evil, but it ain’t stimulus.  More than 80 percent of the benefits of the patch would go to the highest-income 20 percent of households, and more than half would go to the top 10 percent.  These households are least likely to spend a tax windfall.  What’s more, since the AMT patch is extended every year, most of its theoretical victims are unaware that they are in the cross-hairs, so extending the fix is unlikely to affect their incomes at all until tax filing time in 2010.

It is not timely, targeted or temporary. 

But the stimulus train is leaving the station and the AMT patch, and other dubious stimulus measures, are trying to hitch a ride.