The passion of the moderates

Why did three Republican senators give their crucial support to the stimulus bill finally agreed by Congress last night?

The details certainly looked important. The House of Representatives' version of the stimulus bill cost $819bn and contained more money for state budgets and school reconstruction. The Senate version weighed in at $838bn and contained more tax credits and cuts. And the final version, approved on Wednesday evening by negotiators from both legislative bodies, is $789bn, with an added dab of this and a subtracted touch of that.
How did the House and Senate sort out this fine-tuned legislative machinery? The proximate answer, as always, is the triumph of representative democracy and the legislative process. But the ultimate answer is that Arlen Specter, Olympia Snowe and Susan Collins – the three moderate Republican Senators whose support was required to shuttle the stimulus through the Senate – wanted it that way. Why did they want it that why? I'm not sure. As far as I can tell, neither are they.

The final negotiation was a victory of nice-sounding statesmanlike process – "moderation," "centrism," "bipartisanship," "spirit of compromise" – over actual legislative substance. Earlier this week Specter wrote an op-ed in the Washington Post that explained his support for the stimulus bill (his version). His argument for why the bill should be whittled down to under $800bn was essentially: (1) An important life lesson is that you should listen to other points of view; (2) $780bn is less than $940bn; (3) $780bn is greater than $0; (4) if you don't agree with me you'll get $0; and (5) an important life lesson is that you can't always get what you want. And so the Democrats did not get billions of dollars of what they wanted.

But missing from the Specter argument, and from the final negotiation process, was a sense that some points of view are better than others, and that some policy prescriptions will do more to stimulate the economy than others. Here's my favourite example: Senate Republicans wanted a higher proportion of tax cuts in the final version of the bill than was in the House version. That's a point of view, and it even has a theory behind it: while standard Keynesian theory suggests that a dollar of spending is more effective stimulus than a dollar of tax cuts (since the latter is likely to be saved and not spent) there is genuine disagreement over whether this holds in practice. And lots of people agree that carefully targeted tax cuts – reductions in payroll tax withholdings, which overwhelmingly affect middle- and lower middle-class earners – can stimulate consumption.

But instead of having that debate, the Senate took the legislatively lazy route: it added a $70bn patch on the Alternative Minimum Tax. This was strange for many reasons. The AMT patch is not targeted: 80% of the benefits go to the top 20% of wage earners. Nor is it timely: the patch would pass later this year as part of the regular appropriations process, just as it has in years past. And it's not even a great legislative bargaining chip: Chuck Grassley, the Republican senator who stuffed the AMT provision into the bill like a suitcase before a vacation, ended up voting against the stimulus.

So why was it kept? Because it gives the zealous moderates the appearance of winning the process. It looks like Democrats accommodated Republican requests to ratchet up the tax cuts. It looks like Republicans get more tax cuts. And it more than looks like Specter and Collins and Snowe can claim they brokered an "important compromise" during a "difficult time." Also, they helped the middle class. All while doing nothing to stimulate the economy and sucking up dollars that could be put to better use elsewhere.
Specter, Collin and Snowe took a political approach to a policy question – they wanted the symbolism and efficacy of compromise, not the effectiveness of good policy. I would have preferred to see them put their time and our money to use elsewhere. But you can't always get what you want.

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