CRFB warned last year when the stimulus was enacted that there would be enormous pressures to not only extend some of the ARRA measure, but even make them permanent. Doing so is a violation of the principle that stimulus should be timely, targeted, and temporary.
Yet we predicted last January that the Making Work Pay tax credit, the EITC, Pell grants, American Opportunity tax credit, COBRA subsidies, and child support enforcement match were at risk of being extended or made permanent because the President included them in his campaign promises. It turns out we were right. The Making Work Pay tax credit and the COBRA subsidies are being extended temporarily, as explained above. The others, in this budget, are made permanent.
ARRA Policies Made Permanant in the President's Budget (billions)
Expand earned income tax credit+ $30
Expand child tax credit+ $83
Pell Grants+ $187
AMT patch (index 2009 parameters to inflation) $659
Extend American opportunity tax credit $75
Extend child support enforcement incentive match $1
Total Excluding AMT Patch
In fact, the budget includes over $1 trillion to extend policies which were enacted under the ARRA. In fairness, the majority of this money comes from continued AMT patches -- something which was "current policy" long before it was put into the stimulus bill (which is why it should not have been there in the first place). However, even when this is excluded, the budget spends at least $376 billion to make permanent ARRA measures. Worse still, many of these policies are included in the baseline, hidden away as "current policy" when they in fact are anything but. (Following our blog post on this, the Wall Street Journal called the ARRA 'The Eternal Stimulus'.)
This is why we have argued repeatedly that stimulus should stimulate, not push an agenda. And to keep policy makers honest, we believe that all future stilmulus spending should be be fully offset -- even if these offsets occur in the out-years. Otherwise, the medicine meant to heal an unhealthy economy can become addictive, and ultimately do far more harm than good.