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Fred Hiatt Can’t Add

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"Fred Hiatt Can’t Add"

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This is just a staggeringly inept Washington Post editorial on the Senate version of the stimulus:

Sens. Ben Nelson (D-Neb.) and Susan Collins (R-Maine) worked to scrub some less plausibly stimulative stuff from the Senate bill. But that measure still contains some dubious provisions, especially on the tax side. A $15,000 tax credit for new home purchases this year, which would cost more than $35 billion, looks especially wasteful. The proposal, drafted by Sen. Johnny Isakson (R-Ga.), is supposed to stimulate the moribund housing market. Actually, because it is not limited to first-time homebuyers, the credit would do little to reduce swollen inventories: Homeowners who used this tax break to get a new house would have to put their old one up for sale. The Senate bill would also create an $11 billion deduction for sales taxes on car purchases and auto loan interest, a proposal sponsored by Sen. Barbara Mikulski (D-Md.). It’s unclear how many people would be lured into the new-car market, already rich with dealer incentives, by this additional one. Given the modest probable benefits, Congress should cut these provisions and consider devoting at least some of the savings to spending that is likely to provide more immediate bang for the buck.
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The Senate bill also includes a $69 billion “patch” for the alternative minimum tax, without which many middle-income taxpayers would face a stiff tax increase. It was probably inevitable that Congress would enact this measure without paying for it this year. But, since the biggest benefits would go to relatively well-off taxpayers unlikely to increase spending, and since AMT relief was probably already factored into household plans for this year anyway, it’s hard to see how this belongs in an economic stimulus bill.

Here’s what’s true in these paragraphs. The Senate version eliminated some stuff from the House bill that maybe shouldn’t have been there. It’s also true that the Senate version includes these bad tax provisions. But the Post forgot to tell its readers that the bad tax stuff isn’t in the House bill. And the Post also forgot to tell its readers that the bad tax stuff is much larger in magnitude than the bad spending stuff they get rid of. The Post also forgot to tell its readers that the Senate also got rid of a bunch of good stuff from the tax bill. Over all, the Post is implying that the Senate bill is an imperfect improvement over the House bill. The fact that the Senate bill is more expensive doesn’t get mentioned. Nor does the fact that it’s less stimulative get mentioned. Because, hey, it’s a bipartisan compromise so by definition it must be better than Nancy Pelosi’s hippie stimulus.

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