In the opening days of the Obama Presidency, the Democrat Congress pushed through a trillion dollar economic stimulus package. It passed without a single Republican vote in either the House or the Senate.
Nearing the end of the Obama Presidency, however, the Republican Congress has crafted a budget that extends indefinitely many of Obama’s stimulus programs.
Squaring these two events is difficult, considering that Obama’s stimulus is widely viewed as a failure and the Republicans captured Congress in no small part due to opposition to the stimulus and the uncontrolled spending of Obama and Democrat Congressional leadership.
It is especially difficult considering the fact that the Republicans didn’t simply capture Congress, but won two elections by such historic landslides that the party achieved its most sweeping hold on political offices at the federal, state and local levels. There are large swaths of the country where Democrats cannot field a competitive candidate.
It often seems that the only places in the nation where Democrat policies hold any sway is within the leadership office of Congressional Republicans. Living in their own bubble of abject fear of a partisan media, Congressional Republicans are regularly bullied into accepting Democrat policies that neither experience, economics nor political judgement would recommend.
The Republican budget deal, called the omnibus because it throws almost $2 trillion in tax and spending measures into one mammoth package, makes permanent boosts to the Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Credit.
All three of these credits were increased as part of the stimulus package in 2009. The Earned Income Tax Credit was raised for families with 3 or more children, the Child Tax Credit raised eligibility for the credit and lowered the income threshold to qualify and the American Opportunity Credit provided up to $2,500 for college tuition payments for certain families.
That fact that these individual measures, whatever their relative merits, have nothing to do with economic stimulus goes a long way to explain the failure of the Obama’s stimulus package. They are largely government hand-outs to certain families and are better thought of as welfare than tax code changes.
The Republican plan to make these stimulus programs is estimated to cost $160 billion over the next 10 years. This estimate is probably low, as these are fairly open-ended welfare programs and have proven rife with fraud over the past 6 years.
The Treasury Department’s Inspector General determined that over $4 billion in these tax credits were wrongly awarded to illegal immigrants in 2010, immediately following passage of the stimulus. While Congress has discussed ways to tighten eligibility for the credits and block payments to illegal immigrants, it hasn’t taken any action to curtail the abuse.
With Democrats pushing aggressively for an extension of these stimulus credits, Republicans were well positioned to enact measures blocking payments to ineligible workers. Their omnibus bill, however, contains no reforms of these credits. Republicans took no steps to reform these programs, likely making permanent the $4 billion in annual fraudulent payments to illegal immigrants.
While the ongoing fraud in the programs is itself enough reason to not make these credits permanent, there is a larger problem with the Republican action. Making these temporary credits permanent will make it even harder to achieve more meaningful tax reform in the future. The more Republicans clutter the tax code with special credits and exemptions, the more opposition it creates for taming a ridiculously complicated tax code.
In any case, a simple summary of what is happening does more justice to the issue than the details. In 2009, with strong majorities in both chambers of Congress, Democrats temporarily boosted these credits into a new form of welfare. In 2015, with strong majorities in both chambers of Congress, Republicans are poised to make this new welfare permanent.