By Erik Wasson - 12/15/10 12:14 AM EST
Incoming Appropriations Committee Chairman Hal Rogers (R-Ky.) and his staff are racing against the clock in their effort, since the $12 billion pot of unobligated stimulus dollars is being directed toward projects every week. Once those funds are obligated, they become much more difficult to cut.
Time is an issue because Republicans believe it will be difficult to move a rescission bill through a Senate run by Democrats until spring, when it can be attached to must-pass legislation to raise the nation’s debt ceiling. Republicans hope at that time they can win concessions from Senate Democrats in exchange for GOP willingness to lift the debt ceiling.
Republicans taking power in January are chomping at the bit to rescind funds from the stimulus, which they have described as a waste of taxpayer money that did little to lower the jobless rate.
The White House and Democrats in Congress, however, are ready for a fight. They argue that the nation’s economy would be worse off without the stimulus, and that cutting even the $12 billion pot of funds now would just kill jobs and hurt the economic recovery.
“I can guarantee that the number of jobs it would cost would be in the tens of thousands,” Jared Bernstein, economic policy adviser to Vice President Biden, said in an interview with The Hill.
“You would be sacrificing investments that have the potential to generate new industries tomorrow,” he added, noting that the remaining money is highly concentrated in high-speed rail and clean-energy projects that many Republicans have supported previously.
Only $12 billion in stimulus funds has not been obligated, according to the nonpartisan Congressional Budget Office, and that number could be much smaller by the time Congress votes on a spending rescission bill Rogers is preparing.
As a result, Rogers and his staff are also looking at a larger pot of $111 billion that has been obligated to specific projects but not spent. But rescinding those funds could be more difficult because of legal challenges, congressional aides and the White House agree.
“It would open the government up to a huge amount of lawsuits,” said Ethan Pollack, a policy analyst at the left-leaning Economic Policy Institute.
Even Republican staffers acknowledge cutting from the larger pile could be tough.
Some of those funds are under legal contracts, and canceling them would invite a deluge of lawsuits. Many contracts contain stiff clauses allowing contractors to charge large cancellation fees, which would add to the stimulus’s cost with no benefits to the economy.
Rogers wants to know how much of the funding is actually bound up in contracts, and has asked his staff to see if any funds the federal government claims have legally been put under contract are actually more loosely obligated, House aides said.
Republicans have pointed to a Heritage Foundation study conducted before November’s elections that found that $60 billion of $111 billion in unspent discretionary stimulus funding might not actually be under legal contract.
“There is probably a lot more they can do if they really wanted,” said Brian Riedl of Heritage.
A House aide also said some funds that have been obligated could still be rescinded.
“Pretty much every federal agency defines ‘obligated’ in a different way. For some, it means a legal contract of some sort; for others it could just be that they issued a press release,” the aide said.
The $12 billion in unobligated funds is concentrated in long-term investments cherished by Democrats, making it even less likely Senate Democrats or President Obama would go along with rescinding them.
“Any efforts to rescind this stuff would be heavily fought,” Pollack said.
Bernstein said calls to rescind stimulus funds might make political sense to Republicans, but would hurt the economy and end worthwhile projects.
One example cited by the administration is the conversion of a Chrysler plant in Indiana into a solar manufacturing factory by Abound Solar. If unobligated funds were canceled in January, that conversion project would end.
The fight over the funds only covers discretionary stimulus spending in the form of contracts, grants and loans. As of Dec. 4, $45 billion in tax relief and $51 billion in entitlement spending also had not been spent, but the Appropriations Committee only has jurisdiction over the discretionary spending pot.
The unspent tax relief is due to delays in processing filings, an administration source said.
The Congressional Budget Office estimated in November that the Recovery Act had saved or created 3.2 million jobs since it was enacted in 2009.
So far the stimulus has not helped Democrats politically, in part because unemployment soared to more than 10 percent after it was approved, despite an early projection by the Council of Economic Advisers that the jobless rate would not go above 8 percent.
Unemployment stood at 9.8 percent in November.