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Some of the provisions that greased the bailout through the Senate ...

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Tax Earmarks, Pork and Other Bailout Bill Horrors

Some of the provisions that greased the bailout through the Senate …

If you were wondering how the Bush/Paulson financial bailout bill slipped past the Senate last night, the answer is all too familiar:  too many senators signed onto this monstrosity after their pet pork was included.

And what were among the emergencies that were included?  This allegedly critical financial rescue bill is loaded down with tax breaks (or more precisely, extensions of current tax breaks) for such emergencies as:

— “Wooden arrows designed for use by children”  This provision was put into the bill by Oregon Senators Smith and Wyden for the primary benefit of an Oregon arrow manufacturer…estimated to save arrow companies $200,000 annually.
— “Motorsports racing track facilities” A Bloomberg article notes this “will save NASCAR track builders $109 million this year.”
— Rum producers in Puerto Rico and the Virgin Islands
— Investors in the District of Columbia or on Indian reservations.
— Building and renovating restaurants,
— Book donations to public schools, and
— Recipients of settlement payments from Exxon Valdez litigation

The connection between that pork and freeing the credit market from the burden of sub-prime mortgages isn’t quite clear.  

The financial bailout bill includes extending the “exemption of undercover operations (by the IRS) from certain laws” or giving $50 million and $100 million to Midwestern states for “disaster relief,” even though crops have recovered extremely well after this year’s flooding.

While the conservative media rails at the pork barrel items in the financial bailout bill, the other measures in the bill may be even worse.

The most egregious, most frightening aspect of this bill is its hidden attack on every aspect of our economy under the cover of anti-carbon measures contained in what is essentially an energy bill tacked on to the bailout — an energy bill which would not pass Congress were it to come up for a vote.  

Section 117 of the bailout bill calls for this:

The Secretary of the Treasury shall enter into an agreement with the National Academy of Sciences to undertake a comprehensive review of the Internal Revenue Code of 1986 to identify the types of and specific tax provisions that have the largest effects on carbon and other greenhouse gas emissions and to estimate the magnitude of those effects.

So the radical environmentalists’ path to a ‘carbon trading’ system — which both Sens. Obama and McCain favor — would be cleared of underbrush so that our economy could be strangled with the European system as soon as possible.  

If you own a power plant, a steel factory, a dairy farm, or an airline company, or maybe even just a car, this is a large caliber weapon aimed directly at you.  It’s the predicate to taxing carbon emissions.

Section 116 of the bill adds language to the tax code which includes “industrial source carbon dioxide” in a list of items which can be classified as sources of “qualified income,” along with things like fertilizer and timber.  However, since nobody produces “industrial source CO2” as a product for sale, this change is unclear.  

An energy policy analyst at the National Taxpayers Union whom I asked about the provision believes it may be targeting either expected future creation of a “cap-and-trade” regime or voluntary creation of a CO2 trading industry.  However, since many publicly traded partnerships are related to energy production, it would not surprise me to see the provision misused against gas and oil producers in much the same way that the naming of the polar bear as a “threatened species” will be used against American industry (as John Kerry has already demonstrated.)

But that’s not all

The bill doubles the subsidy for biodiesel production from 50 cents per gallon to $1.00 per gallon.  Doesn’t the Senate realize that we can’t save the world by burning our food? Did they not remember the huge increase in food prices over the past two years due in large part to these subsidies diverting food and feed crops into our gas tanks?

The energy provisions in the bailout also include darlings of the environmental left: tax credits for “small wind property,” “geothermal heat pump systems,” and “electricity produced from marine renewables.”  

While tax breaks for alternative energy aren’t necessarily objectionable, the inclusion of them in this bill removes incentive for Democrats to cooperate on a comprehensive energy bill which would include drilling for oil and gas or developing clean coal or nuclear power sources.  The effect of this bill, then, will be to keep us from developing efficient large-scale energy sources. Small wind properties will not lower prices at the pump.

It’s not just energy policy where the bailout bill will raise costs for Americans.

The bill includes the “Secure Rural Schools and Community Self-Determination Program,” expected to cost $3.2 billion over six years and to be used not just for schools but also to “implement stewardship objectives that enhance forest ecosystems,” support programs which “control noxious and exotic weeds” and enhance “soil productivity” or “improve cooperative relationships among the people that use and care for Federal land and the agencies that manage the Federal land.”  

Excuse me? The financial bailout bill pays for a marketing campaign for the Forestry Service or the Bureau of Land Management so we’ll like them better?

As if that weren’t bad enough, the bailout bill also contains the “Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008,” which is also known by the bill number S.558.  The measure requires group insurance plans to have deductibles, copayments, coinsurance, and annual and lifetime limits for mental health and drug addition/abuse coverage which are no more restrictive or expensive for the policy holder than those same items for other medical and surgical coverage. The measure would apply to firms with 50 or more employees.

The full CBO report makes the following statements:

— “The direct costs of the mandate (on the private sector) in S. 558 would be $1.5 billion in 2009, rising to $3.4 billion in 2013.”
— “Enacting S. 558 would increase federal direct spending for Medicaid by $280 million over the 2009-2012 period and by $790 million over the 2009-2017 period.”  There are also another $485 million of “discretionary costs” by 2017.
— “More of an employee’s compensation (will be) received in the form of nontaxable employer-paid premiums, and less in the form of taxable wages… CBO estimates that federal tax revenues would fall by $140 million in 2009 and by $3 billion over the 2009-2017 period.”
— “Responses would include reductions in the number of employers offering insurance to their employees and in the number of employees enrolling in employer-sponsored insurance…”

This outrageous federal intrusion into health insurance is exactly the sort of legislation that has made our health insurance system so dysfunctional and expensive.  

Despite claims by Harry Reid of great bipartisan work, the bailout bill passed by the Senate last night contains exactly the sort of waste and anti-business payback from Democrats to unions and environmentalists which make Americans distrust and dislike our government.  

House members should vote down this travesty and substitute the Republican Study Committee’s alternative for it, and toss it back to the Senate.

Written By

Ross Kaminsky has been a professional derivatives trader for over 20 years. Ross is a fellow of the Heartland Institute and writes about political economy and current events at Rossputin.com. He also contributes to blogs for the National Taxpayers Union and FreedomWorks among others.

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