January 29, 2009 / 11:15 AM / 9 years ago

Will U.S. spending bill stimulate the economy?

WASHINGTON (Reuters) - Will spending $50 million (35 million pounds) to promote arts in the United States help stimulate the U.S. economy? How about $335 million to educate people about sexually transmitted diseases?

<p>Will spending $50 million (35 million pounds) to promote arts in the United States help stimulate the U.S. economy? How about $335 million to educate people about sexually transmitted diseases? U.S. President Barack Obama speaks to the press between meetings with Republican House and Senate leadership on Capitol Hill in Washington, January 27, 2009. REUTERS/Jason Reed (UNITED STATES)</p>

Those items and more form part of an $825 billion economic stimulus that may grow larger, creating a feeding frenzy in Congress as lawmakers seek to fund their wish lists.

On Wednesday night, stimulus legislation cleared the House of Representatives, where members hew more closely to party ideology than the Senate. The 244-188 vote was along party lines, with every Republican voting against the bill designed to fight the worst economic crisis since the Great Depression.

Senate Majority Leader Harry Reid said he would seek to begin debate in the Senate on Monday. President Barack Obama wants the package approved by mid-February.

There are plenty of spending measures in the legislation aimed at directly helping generate economic growth and assisting people in need, from $275 billion in temporary tax cuts to $300 billion in assistance to the unemployed and to cash-strapped states reeling from the economic downturn.

But it is the litany of other, seemingly nonemergency items that is upsetting some stomachs on Capitol Hill, like the $15.6 billion in Pell grants for college students, $6 billion for modernizing college buildings, $600 million to buy new cars for government workers and $150 million in repairs to the Smithsonian Institution.

Alabama Republican Sen. Jeff Sessions, a conservative, called the bill a huge mistake that he would vote against.

“I‘m convinced that they (Democrats) are seizing this as an opportunity to fund programs to a degree that they could never have funded before simply by calling it a way to create jobs,” he said.

House of Representatives Speaker Nancy Pelosi, a California Democrat, has a letter of support for the bill from 146 economists, including five recipients of the Nobel Prize for Economics.

Democrats argue the legislation will do what it is intended to do -- give the economy a fast jolt.

“I can only tell you what the experts are telling us,” said Florida Democratic Sen. Bill Nelson, “that somewhere around 70 percent of the spending will occur within the first 12 or 14 months. And that’s stimulative.”

DUELING ECONOMISTS

On the other hand, the libertarian Cato Institute has its own list of opposing economists, about 200 of them, who argued in a full-page newspaper advertisement that “it is a triumph of hope over experience to believe that more government spending will help the U.S. today.”

Ethan Siegal of The Washington Exchange, a private firm that tracks Congress for institutional investors, said the legislation first and foremost was about helping bail out the states.

But also, he said, “It’s about Democrats and President Obama trying to put forward and jump-start policy initiatives that they believe in, that they believe the country should be headed in, and that the stimulus package is the best place to do it.”

White House spokesman Robert Gibbs said the critics were focusing on only a small part of a large package that will create or save as many as 4 million jobs for an economy that has been shedding hundreds of thousands in recent weeks.

“I know there is a tendency -- and there always will be -- to focus on ... 0.02 percent of a piece of legislation. I have a hard time believing that the 0.98 percent of the other 99 percent aren’t the large focus of members of Congress,” Gibbs said.

The big political question is how many Republicans will join with Democrats and lend the legislation the appearance of a bipartisan agreement when the Senate considers it.

Many Republicans would normally be inclined to vote reflexively against such a plan. But they are thinking twice about this one because they would be going against the wishes of a popular new president at a time of economic peril and could face a backlash from voters when they come up for re-election.

Democrats say whatever happens, the $825 billion plan may only be one important step in an even-larger effort to save the economy from collapse.

“We are far from getting to the bottom of this problem,” said Nelson.

(Additional reporting by Thomas Ferraro and Susan Cornwell; Editing by Peter Cooney)

steve.holland@reuters.com

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