Stimulus package: needed kick or corporate giveaway?

Congress gets down to details on reviving the economy - and critics see lots of pork.

Coming soon to the school lunch trays of America: More asparagus, spinach, bison meat, peas, cabbage, cauliflower, cucumbers, cranberries, pumpkins, prunes, and sour cherries. (Message to parents: Pack lunch.)

That's if a bill to be debated on the Senate floor today becomes law. The cafeteria creativity is just one sign of how congressional measures ostensibly aimed at economic revival will also mean massive windfalls for specific industries and companies.

From $1 billion in tax rebates for global corporations to school-lunch subsidies for crops that are having bad years, businesses have clamored for a stunning range of subsidies and bailouts in a stimulus package that could add up to more than $100 billion in new spending.

The fact that companies, as well as taxpayers and consumers, stand to benefit from so-called fiscal stimulus measures is not surprising. Both parties agreed early on to assist certain hard-hit industries, and even the more controversial handouts could help the economy even as they aid favored firms.

But some critics say the process has run amok, as bipartisanship has given way to a special-interest free-for-all.

"We've been subjected to a rather disgusting tendency to try to shoehorn every deferred special-interest proposal into current legislation on the grounds that it will promote current recovery or fight terrorism," says Henry Aaron, a senior fellow at the Brookings Institution here.

War profiteers?

The shape of the final package is unclear, with the Senate plan still taking shape. But the fight over who gets help is prompting charges of war profiteering from public-interest groups. It's also redrawing partisan lines that had been kept largely under wraps since President Bush declared a war on terrorism.

After uniting to pass billions in aid for rebuilding Manhattan and bolstering ailing airlines, lawmakers early on approached something like consensus on the terms of the stimulus package.

At the urging of Federal Reserve Chairman Alan Greenspan, budget-committee chairmen and ranking members in both houses agreed that any stimulus plan should be short term - no more than 12 to 18 months - and focus on getting more spending into the economy as soon as possible.

But then, the wheels started coming off the bipartisan cart. House Republicans pulled out of discussions with Democrats and pushed their own stimulus plan through on a near party-line vote. That bill was heavily loaded with tax cuts for business, including:

• A $25 billion repeal of the corporate alternative-minimum tax, plus a refund of all payments since the law was passed in 1986.

• A $21 billion extension of a tax provision that allows US companies to avoid taxes on profits from overseas operations.

• $39 billion in tax breaks for business to write off new investment at a faster rate, especially for computers and technology.

Critics concluded that the House plan did not meet the bipartisan criteria for a stimulus. Instead, it gave long-term tax breaks to big companies, without any commitment that new jobs or investments would result.

The repeal of the alternative minimum tax for corporations alone works out to $1.4 billion for IBM, $833 million for General Motors, $671 million for General Electric, $572 million for Chevron Texaco, and so on, according to Citizens for Tax Justice, a public interest group.

"When people find out about this, they're angry," says Micah Sifry, senior analyst with Public Campaign, a Washington-based group that lobbies for campaign finance reform.

Sponsors say that the infusion of cash will encourage investment, albeit indirectly. "Tax adjustments ... will free up money that businesses would otherwise have to send to the IRS, so they can channel it back into the economy," says House sponsor Bill Thomas (R) of California.

With the Capitol still closed to most visitors, much of the usual give-and-take between lobbyists and legislators over the terms of this bill isn't taking place. Some business lobbyists complain that the only place they can meet lawmakers is at a fundraiser. Others worry feel shut out altogether.

"It's very hard to connect with Congress with buildings closed.... For small citizens groups, it's even harder," says Joan Claybrook, president of Public Citizen. "We're having trouble even reading all the bills."

Senate plan

The Senate bill to be taken up today focuses on tax rebates for low-income workers, as well as extending health-insurance coverage and adding 13 weeks to unemployment insurance.

But to win the last few votes needed to get bill onto the floor, Senate sponsors also piled on plenty of special-interest legislation as well. The most controversial is $6 billion in last-minute support for agriculture. This deal includes $220 million to buy agricultural products that had bad crop years in 2000 or 2001 - at least 25 percent of which will be distributed to schools under the School Lunch Act.

Also buried in the Senate bill are tax credits for chicken farmers who convert poultry waste to electricity, and a tax write-off for the movie industry that did not make it into the House bill. Native American tribes also stand to gain new authority to issue tax-exempt private activity bonds.

"What is needed up front is tax cuts tied to increases in activity by businesses or consumers," says Mr. Aaron of the Brookings Institution. "You can count on individuals to spend a significant part of any reduction they may get, but you can't assume that with businesses."

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