Stimulus spending and partisan wrangling

After a protracted debate, the Senate passed a pared-down bill Thursday to provide $26 billion in aid to financially strapped states to help pay teachers salaries and Medicaid benefits. The measure signaled the unofficial end to Congress’ efforts to stimulate the economy with borrowed money; the new spending in the state aid proposal was more than offset by eliminating a tax break for corporate earnings overseas, rolling back food stamp benefits to pre-recession levels and cutting Medicaid payments for selected drugs.

Just because they’re suffering from stimulus fatigue, however, doesn’t mean lawmakers should stop trying to promote economic growth. Yet that’s what seems to be happening in the Senate, where a bill to spur lending to small businesses (HR 5297) is stuck in partisan wrangling.

The major feature of the bill is a $30-billion loan fund that some critics have called a bailout for small banks — a downscaled version of the $700-billion Troubled Asset Relief Program. But the fund wouldn’t be used to rescue community banks from their own excesses; instead, it’s structured to appeal only to banks that want to lend more money to small businesses. Other provisions of the bill would expand state and federal lending programs and extend tax breaks for small businesses.

The bill isn’t a cure-all for small businesses — the sluggish economy is at least as big a problem as tight credit — but it would improve their situation. The problem is that party leaders can’t stop squabbling over the number of amendments to consider. A particular sticking point seems to be a proposal by Sens. Jeff Sessions (R-Ala.) and Claire McCaskill (D-Mo.) to cap the growth of discretionary federal spending. It’s an idea worth debating, but not at the expense of this bill.