H.R. Substitute: Senate Substitute to The American Recovery and Reinvestment Act

H.R. Substitute

Senate Substitute to The American Recovery and Reinvestment Act

Date
February 11, 2009 (111th Congress, 1st Session)

Staff Contact
Communications

Bill Summary

BACKGROUND
On January 28, 2009, the House passed the American Recovery and Reinvestment Act by a vote of 244-188, without a single Republican supporting the bill and 11 Democrats opposing. As passed by the House, the Democrat spending bill cost $821 billion. The bill contained $361 billion in new appropriated spending, $278 billion in increased mandatory spending, and $182 billion in tax provisions. The following week the Senate began consideration of its own version of the bill.

The Senate quickly increased the size and scope of spending in the massive "stimulus" bill, driving the cost of the bill to more than $920 billion-or $100 billion more than the House bill. Approximately $70 billion of that increase provided for a one year AMT patch. In addition, the Senate added $47 billion with amendments that further drove up the cost of the bill, including an amendment that provides a federal income tax credit of up to $15,000 for first time homebuyers who purchase new principal residences in 2009 and a $6 billion increase for the National Institutes of Health. The Senate also rejected multiple Republican amendments that would have reduced or reprioritized spending.

On Friday, February 6, it was announced that Democrat Leadership in the Senate had come to an agreement with three Republican senators, allowing the legislation to proceed for a vote on the floor and overcome the Senate's super-majority procedural hurdles.

The agreement reduced the cost of the Senate bill from $920 billion to $841 billion-or $20 billion more than the House bill. To reach this funding level the Senate deal cut the base bill (without Senate amendments) through a combined reduction of authorized spending and tax relief. The Senate then added all of the floor amendments back into the bill, raising the cost to $841 billion. However, the estimated cost of debt services for the $820 billion House-passed bill was an additional $347 billion over ten years. When the debt service cost is added on to the Senate package, the total ten year cost of the Senate bill increases to a staggering $1.16 trillion.

On Tuesday, February 10, the Senate voted on and passed the measure-considered as an amendment in the nature of a substitute offered by Sens. Nelson (D-NE) and Collins (R-ME)-by a vote of 61-37. The bill will now proceed to a conference between the House and the Senate to reconcile the differences with the two bills. Democrats have already insinuated that much of the spending removed by the Senate substitute may be put back into the massive bill during the conference. House Speaker Pelosi has publically laid the groundwork for adding eliminated House spending back into the bill, stating, "These cuts are very damaging-[the House bill] was put together very carefully." In addition, the Washington Post reported on Saturday, February 7, that "House Majority Leader Steny H. Hoyer (D-MD) said House Democrats will push hard to restore the Senate's deletions."

Discretionary Spending

Mandatory Spending

Tax Provisions

Total

H.R. 1
(As Passed in the House)

$361 billion

$278.4 billion

$182.2 billion

$821 billion

Senate Substitute

$289.8 billion

$259.4 billion

$292.5 billion

$841 billion

 

SUMMARY OF DIFFERENCES
This document contains a brief summary of the major changes made to the House-passed version of the bill by the Senate-passed substitute. For more information on the original House-passed version of the bill, please see the Legislative Digest for January 28, 2009.

Spending:

The Senate substitute reduces the amount of spending subject to appropriations to $289.8 billion, which is $76 billion less than the first Senate version and $71.3 billion less than the House passed bills. The following is a non-exhaustive list of some of the major funding differences between H.R. 1, as passed in the House, and the Senate bill as modified by the Nelson/Collins substitute.

State Stabilization Fund: Reduces funding for the State Stabilization Fund from $79 billion in the House bill to $39 billion.

Highway Funding: Reduces funding for the Federal Highway Administration for highway investment from $30 billion in the House bill to $27 billion.

Pell Grants: Reduces additional funding for increased Pell Grant subsidies in 2009 and 2010 from $15. 6 billion in the House bill to $13.8 billion.

K-12 School Construction: Eliminates $14 billion in funding from the House bill for K-12 school construction.

Higher Education Facilities: Eliminates $6 billion in higher education facility maintenance and construction funding that was included in the House bill.

Airport Improvements: Reduces grants for the Federal Aviation Administration for airport infrastructure improvement from $3 billion in the House bill to $1.1 billion.

Public Transit Grants: Increases funding for public transportation grants through the Federal Transit Administration from $6 billion in the House to $8.4 billion.

Rail Modernization: Eliminates $2 billion included in the House bill for rail modernization programs.

PHSSEF Prevention/Wellness: Eliminates $3 billion from the House bill for funding for the Public Health and Social Services Emergency Fund for prevention and wellness.

Neighborhood Stabilization Program: Eliminates $4.1 billion in funding for the Neighborhood Stabilization Program that was included in the House bill.

HOME Program: Increases funding for the HOME Investment Partnerships Program from $1.5 billion in the House bill to $2.25 billion.

Food Stamps: Reduces the increase in mandatory spending for food stamps in 2009 from $20 billion in the House bill to $8.2 billion.

Broadband Grants: Eliminates a House-passed provision that would increase broadband grants provided by the Department of Agriculture's (USDA) Rural Utilities Service Program by $2.8 billion.

Broadband Mapping: Increases funding for Census Bureau broadband mapping from $2.8 billion in the House-passed bill to $6.6 billion.

Prison Buildings and Facilities: Provides $800 million in new funding for federal prison buildings and facilities that was not included in the House bill.

Office of Justice: Reduces funding for Office of Justice Programs from $3 billion in the House-passed bill to $1 billion.

NASA: Reduces funding for NASA research and related activities from $2.5 billion in the House bill to $1 billion.

Defense Facilities: Reduces funding for Defense facilities from $4.5 billion in the House bill to $2.9 billion.

Weatherization Assistance Program: Reduces funding for the Weatherization Assistance Program from $6.2 billion in the House bill to $2.9 billion.

Renewable Loan Guarantees: Increases funding for loan guarantees for the production of standard renewable energy from $6 billion in the House bill to $7 billion.

State and Local Energy Grants: Reduces funding for State and local energy grants from $6.9 billion in the House-passed bill to $4.7 billion.

Defense Environmental Clean-Up: Increases funding for defense environmental clean-up from $500 million in the House bill to $5.5 billion.

FCC Broadband Grants: Eliminates $3.3 billion in Federal Communications Commission broadband grants that were included in the House bill.

TSA Security: Increases funding for Transportation Security Administration (TSA) aviation security programs from $500 million in the House bill to $1 billion.

NPS Construction: Reduces funding for National Park Service construction from $1.7 billion in the House bill to $589 million.

EPA Grants: Reduces funding for Environmental Protection Agency State and Tribal Assistance Grants from $8.4 billion to $6.4 billion.

Wildland Fire Management: Reduces funding for wildland fire management from $850 million to $500 million.

NEA: Eliminates $50 million in funding for the National Endowment for the Arts that was included in the House bill.

DOL Training Programs: Reduces funding for Department of Labor (DOL) Employment Training Programs from $4 Billion in the House bill to $3.2 billion.

STD Prevention: Eliminates $400 million in funding for the Centers for Disease Control to conduct STD prevention activities.

NIH Director: Increases funding for the National Institutes of Health Office of the Director from $1.5 billion in the House bill to $2.7 billion.

NIH National Center for Research: Reduces funding for the NIH National Center for Research from $1.5 billion to $300 million.

Head Start: Reduces funding for Head Start and Early Head Start programs from $2.1 billion to $1 billion.

Physician Training: Eliminates $600 million in funding for new training of nurses and physicians carried out by Health and Human Services from the House bill. According to the accompanying Appropriations Committee Report, the funds were allocated because, "A key component of attaining universal health care reform will be ensuring the supply of primary health care providers."

Health IT Coordinator: Increases funding for the Office of the National Coordinator of Health Information Technology from $2 billion in the House bill to $3 billion.

Department of Commerce Headquarters: Removes $34 million for the Department of Commerce Headquarters.

Health Provisions:

COBRA Subsidy: Provides a 50% federal subsidy to laid off individuals electing COBRA continuation coverage from their former employers. The subsidy will extend for up to 12 months, as opposed to nine months in the underlying Senate bill. The House bill provides for a 65% federal subsidy for a 12-month period. This change reduces the cost of the provision from $40.7 billion in the House bill to $23 billion. In addition, the Senate substitute does not include language in the House that would permit former employees over age 55, or those with at least 10 years of service with the employer, to remain on COBRA until becoming eligible for Medicare.

Qualifying Individual Program: Extends for 12 months, until December 2010, the Qualifying Individual program, which provides assistance through Medicaid for low-income seniors to pay their Medicare premiums. The House bill includes no such provision.

Medicaid Assistance to States: Maintains the formula of the underlying Senate bill, whereby approximately 80% of the nearly $90 billion increase in the federal Medicaid match rate is provided on an across-the-board basis, with the remaining 20% allocated to states experiencing high unemployment. By contrast, the House bill spends the same overall amount, but targets 50% of the additional Medicaid spending to high-unemployment states, with the remaining half providing an across-the-board increase. The Senate bill also provides a larger increase in Medicaid Disproportionate Share Hospital (DSH) spending than the House-passed measure.

Tax Provisions:

AMT: Provides for a one year Alternative Minimum Tax "patch" which prevents middle-income taxpayers from being subject to a tax increase in 2009. This provision would save taxpayers approximately $70 billion.

New Home Credit: Includes an amendment that provides a Federal income tax credit of up to $15,000 for anyone who purchases a new home for their principal residence in 2009. The House bill expands a tax credit available exclusively for first time home buyers. The increased tax credit is estimated to result in a deficit increase of $35.5 billion.

Making Work Pay Tax Credit: In order to reduce the deficit impact of the tax provisions in the bill, the substitute reduces the earnings eligibility cap for the new refundable tax credit from $75,000 to $70,000 for an individual filer (twice as much for a married couple filing jointly).

Refundable Tax Credit: The House bill expands the refundable portion of the child tax credit by eliminating the $8,500 earnings floor that currently exists. The Senate bill lowers the earnings threshold for the credit to $8,100. JCT estimates that the House provision would cost $18.2 billion, while the Senate provision would cost $7.2 billion.

American Opportunity Tax Credit: The House bill makes 40% of Hope Scholarship tax credits for college students refundable, while the Senate substitute reduces that number to 30%, reducing the deficit impact from $3.5 billion in the House to $2.7 billion.

PROVISIONS REMAINING IN THE SENATE VERSION

Wasteful Spending: Includes non-stimulative spending items from the Senate and House bills, including:

Ø $25 million for maintenance on off-road ATV vehicle routes.

Ø $20 million to remove fish passage barriers.

Ø $43 million for other park and fish and wildlife trails.

Ø $240 million for the Coast Guard to alter or remove 12 obstructive bridges.

Ø $75 million for building repairs at the Smithsonian.

Ø $200 million for Americorps and other paid volunteerism programs.

Ø $1 billion for expenses in conjunction to the 2010 decennial census.

Ø $300 million for federal procurement of plug-in cars.

Record Deficit Spending: According to CBO, under current law, the federal deficit will rise to a record $1.2 trillion, or 8.3% of GDP, in 2009. Even without this massive spending bill, the deficit will be by far the highest on record nominally and as a percentage of GDP during peacetime, easily exceeding the previous record of 6% in 1983 and the highest New Deal level of 5.9% in 1934. CBO estimates that the Senate bill would cost $841 billion, which does not include debt service for the interest created by the legislation over the 2009-2019 period. The estimated cost of debt services for the $820 billion House passed bill was $347 billion. When that number is applied to the Senate substitute, the total ten year cost of the bill increases to a staggering $1.16 trillion.

Payments to States: Provides $90 billion for Medicaid spending for states and $39 billion for the State Fiscal Stabilization Fund. According to the liberal Center on Budget and Policy Priorities, the total budget deficit for the States collectively for the remainder of Fiscal Year 2009 is $43 billion. Given that the federal government's Fiscal Year 2009 deficit is already projected at $1.2 trillion-or 27.5 times greater than the total State shortfall-it is hard to understand why the Democrats would choose to further exacerbate the federal deficit, especially since most States are subject to balanced budget requirements whereas the federal government is not.

Refundable Tax Credits: Contains $150 billion in refundable tax credits to provide direct payments to individuals that that pay little or no income taxes. Unlike tax cuts, these refunds do little to spur growth, create more jobs, or stimulate the economy and are more similar to new spending through tax policy than actual tax cuts.

Unemployment Insurance Extension: Extends the current extension of unemployment insurance (UI), which is scheduled to expire on March 31, 2009, through December 31, 2009. The extension is estimated to cost $27 billion.

Justice Assistance Grants: Includes $1.2 billion for Justice Assistance Grants (JAG) which are used, in part, by local government agencies to fund pretrial releases for criminal defendant at no cost to the defendants.

Funds Relatively Few Roads and Bridges: Despite calls by Democrats for increased infrastructure spending to create jobs, a relatively small share of the total $840 billion package is devoted to transportation infrastructure-$45.3 billion or 5.3% and only $27 billion or 3.2% for highway construction.

TANF "Emergency Fund": Includes $3 billion to create a new Temporary Assistance for Needy Families (TANF) welfare program emergency fund. The emergency fund would be used to provide money to States that increase TANF caseloads or provide increased short-term cash benefits. The bill waives requirements that obligate states to consider rising caseloads when determining TANF work requirements. Thus, the legislation would encourage States to increase caseloads without increasing the number of individuals required to obtain work, which was a key component of the 1997 welfare reform that has dramatically decreased the number of Americans dependant welfare.

Healthcare for Fired CEOs: Expands a program to cover unemployed workers through their former employer using the COBRA continuation health subsidy. Therefore fired CEOs could obtain government subsidized health care benefits from the federal government.

DTV Converters: Contains $650 million for Digital-to-Analog Converter Box Coupons and related activities surrounding the ongoing transition to digital television.

PHS Headquarters: Includes $88 million for the cost of leasing a new facility and moving the headquarters of the Public Health Service, which houses 2,500 federal employees.

Comparative Effectiveness: Provides $1.1 billion to conduct "comparative effectiveness research" to evaluate the effectiveness of different preventative healthcare interventions. Some Members may echo the Congressional Budget Office's concerns, expressed in a December 2007 report, that such a dramatic increase in federal spending-including a doubling of the budget for the Agency for Healthcare Research and Quality (AHRQ) could lead to ineffective results. Further, some Members may be concerned that the money for comparative effectiveness research could eventually be used to sanction government rationing of health care goods and services, consistent with the draft House Appropriations Committee report that said that "more expensive [treatments] will no longer be prescribed" as a result of such research.