Press Release
Thursday, March 07, 2002

WASHINGTON - The Concord Coalition said today that an expensive, three-year, thirty percent special depreciation allowance in the economic stimulus bill passed by the House and Senate will do very little to provide short-term stimulus but will make it more difficult to achieve a balanced budget after the economy recovers. 

“Unfortunately, the main effect of this so-called ‘stimulus' provision is to signal that it is now open season on the Federal budget. It will be much harder to hold the line on appropriations or anything else after giving away nearly $100 billion on something as dubious as this,” said Robert Bixby, Executive Director of The Concord Coalition.

“At a time when the economy is clearly rebounding on its own and the budget is plunging back into deficit, there is absolutely no good reason to give out $97 billion in depreciation tax breaks over the next three years, especially the $62 billion that comes in fiscal years 2003 and 2004. Even if the special allowance is justified as stimulus insurance for this year's recovery, the three-year window of opportunity to claim the allowance nullifies the incentive to move up investment decisions,” Bixby said 

“The Concord Coalition does not oppose other provisions of the stimulus bill, but we have consistently recommended that any such legislation should be carefully designed to have its maximum effect in the very near future, minimize costs in later years, and provide the most bang for the buck. Back loaded options, whether tax cuts or spending increases, are not the right method of providing short-term economic stimulus. The special depreciation allowance in the economic stimulus bill fails that test. The first year stimulus of $35 billion is greatly exceeded by the $62 billion total cost in the second and third years,” Bixby said. 

“Moreover, assuming that it will be allowed to ‘sunset' in September of 2004 ¾ two months before Election Day ¾ is not at all realistic. This provision will likely become a costly giveaway that is routinely extended at a cost of around $200 billion over the next decade. Indeed, in this very same bill Congress renews 15 expiring tax provisions, thus demonstrating the longevity of ‘temporary' tax provisions,” Bixby said.

“Under the guise of helping unemployed workers and providing economic stimulus, Congress has dug a deeper deficit hole in fiscal years 2003 and 2004 that amounts to $72.5 billion ¾ after the current economic slowdown has ended. Only 8 percent of the cost in these two years is due to the unemployment insurance provisions. Fully 85 percent of the FY2003 and FY2004 cost of this bill comes from the special depreciation allowance. If Congress is serious about wanting to balance the budget, it is off to a very bad start,” Bixby concluded.