Bill to Extend Key Stimulus Measures Becomes Law
On Friday, the President signed into law a bill to extend several notable provisions under February's American Recovery and Reinvestment Act. The bill will provide more funding for unemployment benefits, extend and modify the homebuyer tax credit, and extend the increase the carryback loss period from two to five years to all companies. Before the passage of the ARRA, CRFB warned that a number of provisions were in danger of being renewed or made permanent, even though they were enacted as temporary measures.
CBO estimated that these measures will cost $2.4 billion, $10.8 billion, and $10.4 billion, respectively, over the next 10-years; and $48 billion total at their respective peaks.
Thankfully -- as per CRFB's urging -- these costs would be paid for over the ten-year window, mainly through a provision to delay the implementation of a rule to allow the worldwide allocation of interest for the purposes of taxation.
The bill will add an addtional 14 weeks of unemployment benefits across the board, and an additional 20 weeks for high unemployment states. This will increase the maximum number of weeks unemployment could be collected from 79 to 99. The bill will also extend the first-time homebuyer credit through April 30, 2009, while allowing new primary homebuyers to become eligible for a $6,500 tax credit. And finally, the bill would extend "net carry back rules," allowing corporations of all sizes to count recent profit losses against gains from the last five years in order to qualify for tax refunds.
CRFB is encouraged that Congress and the President have begun finding ways to pay for additional stimulus and spending measures. In order to balance the potential need to continue boosting aggregate demand against the serious danger of increasing our debt, it is important that any new stimulus be offset in the out years. And even then, the decision over whether to extend portions of the ARRA -- or other stimulus -- must be made based upon careful economic scrutiny rather than political analysis.