Sorting Out the Stimulus

As Senate and President Obama offer details on their packages, Republicans question whether spending on education and aid to states will stimulate economy.
January 26, 2009

College leaders confident that the federal government's economic stimulus package would pour billions of dollars into higher education should probably take a deep breath. A version of the legislation introduced in the Senate Friday would be somewhat less generous to colleges and students than the financial package unveiled by the House the week before, and while President Obama emphasized science and student aid in laying out his own plan Saturday, Republicans are balking at many of the spending proposals that would most benefit higher education.

On Saturday, President Obama, responding to growing Republican unease over the size and particularly the makeup of the stimulus packages, used his Saturday radio address to offer his most direct argument yet for why the $825 billion investment was necessary, and why Congress should act fast. A four-page summary of the package contained more details than the White House has released previously, emphasizing several key goals important to higher education:

  • "Increasing college affordability for 7 million students by funding the shortfall in Pell Grants and increasing the maximum award level by $500."
  • "Providing a new higher education tax cut to nearly 4 million students. The plan will create a new $2,500 American Opportunity Tax Credit that is partially refundable. As a result, the nearly one-fifth of high school seniors who receive no tax credit under the current system will receive a tax cut to make college affordable for the first time."
  • "Tripling the number of undergraduate and graduate fellowships in science, to help spur the next generation of home grown scientific innovation."
  • "Preventing teacher layoffs and education cuts in every state, maintaining key reforms, and ensuring all schools have advanced technology for the 21st century economy."

Those broad goals are consistent with many of the provisions in the version of the stimulus legislation that the House Appropriations and Ways and Means Committees introduced 10 days ago and approved last week, and summaries of the bills that the Senate Appropriations and Finance Committees made public on Friday.

The summaries of the Senate legislation made clear that they lacked details, and that full versions of the measures would not be available until after the two Senate committees formally take them up on Tuesday. Based on available information about the Senate measures, the two chambers' plans have much in common, but the Senate would in several key ways appear to provide less to colleges and students than the House would, as seen in the table below:

The Stimulus and Higher Education

  House Senate
Aid for Students    
Pell Grants $15.6 billion to increase maximum grant by $500 and eliminate shortfall $13.9 billion to increase maximum grant and close shortfall
College Work Study $490 million N/A
Loan Limits Increase limit on unsubsidized loans by $2,000 N/A
Higher Education Tax Credit Temporarily replace Hope tax credit with $2,500 credit available for four years of college. Credit phases out for individuals with income of $80,000, $160,000 for couples. Credit is 40 percent refundable. Cost: $12.5 billion over 10 years Temporarily replace Hope tax credit with $2,500 credit
available for four years of college. Credit phases out for individuals with
income of $80,000, $160,000 for couples. Credit is 30 percent refundable. Cost: $12.9 billion over 10 years
529 savings plans   Allow computers to count as qualified expenses under 529 savings plans
Education Aid for States $39 billion for school districts and public colleges, distributed through existing formulas $39 billion for school districts and public colleges, distributed through existing formulas
  $25 billion to states for "high priority" needs, "which may include education" $25 billion to states for "high priority" needs, "which may include education"
College/School Facilities $6 billion for "higher education modernization, renovation, repair"; $1.5 billion for grants and loans to colleges, schools, and local governments for energy efficiency $3.5 billion to improve energy efficiency and technology infrastructure of higher education facilities
National Institute of Standards and Technology $300 million to construct research buildings at colleges N/A
Agricultural Research Service $209 million for facilities N/A
Scientific Research    
National Science Foundation $2 billion for research grants, $900 million for equipment and facilities, and $100 million for science education $1.4 billion for grants and infrastructure
NASA $600 million for climate change and other research $1.5 billion
National Institutes of Health $1.5 billion for biomedical research, $2 billion for facilities renovation and capacity building $3.5 billion for biomedical research
Energy Department $2 billion for energy efficiency research; $2 billion for basic physical science research $40 billion over all, an undetermined portion for research
Pandemic research $900 million  
Job Training $4 billion $3.4 billion
Preparing health care workers $600 million for training primary care doctors, dentists and nurses N/A
Student Aid Administration $50 million to help Education Department administer student aid in changing student loan environment N/A
Help for Lenders $10 million for larger subsidies for lenders N/A
Arts $50 million for National Endowment for the Arts N/A

Both bills would send $39 billion to the states to help them stave off cuts to education programs, and another $25 billion that states could use for education and other essential services. Both bills would also increase the maximum Pell Grant by $500 and eliminate the need-based aid program's shortfall.

But the Senate bill, at least based on the summary, appears to provide about $1.7 billion less for Pell Grants than the House version. In addition, the Senate bill would provide billions less for higher education infrastructure needs, less for physical sciences research at the National Science Foundation, and a higher education tax credit that would be somewhat less useful to students from low-income backgrounds.

The entire stimulus package will have much less to offer colleges and students (and beneficiaries of many other social programs) if Congressional Republicans have their way. In speeches and television appearances over the weekend, Sen. John McCain of Arizona and Rep. John Boehner of Ohio, both of whom are prominent members of the minority in their respective chambers, criticized the Democrats' stimulus packages for greatly emphasizing spending that may or may not spark the economy rather than tax breaks that would put money directly into consumers' and businesses' pockets.

Boehner specifically singled out aid for education in his criticism. "[P]roviding $300 billion of this package to states -- $166 billion in direct aid to the states, another $140 billion in education funding -- this is not going to do anything, anything to stimulate our economy, to help the -- our ailing economy," the Ohio Republican said on NBC's "Meet the Press."

If the Obama administration decides it needs to reshape the stimulus package to win over Republicans, some of the new spending contained in these early versions -- much of which would help postsecondary institutions by easing students' tuition burdens, staving off state budget cuts, financing facilities renovation, and bolstering funds for scientific research and jobs -- could disappear.


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