In a single sentence Diana Furchtgott-Roth, a scholar at the Manhattan Institute, has made the best observation yet on the $26 billion Congress spent earlier this week: “Not a penny for the private sector.” The money is going to bail out state governments that have overspent.  Furchtgott-Rott comments:

With this new law, Congress is rewarding states that have been fiscally irresponsible. It should leave states alone to make needed budget cuts and get their finances in order – and repeal the section of the health care law that expands Medicaid, further burdening states.

The $26 billion will come from cuts in the food stamps program (or “cuts,” as one wag put it, a recognition that nobody believes this temporary measure is to be taken seriously),  and higher taxes on multinational corporations-those taxes you can count on being longer-lasting, if government continues along its current path. Corporations, it might be noted, hire people only when they have the cash to do so. And, unlike governments, businesses are more likely to pay employees based on their actual worth.

Furchtgott-Roth adds:

States haven’t broached the subject of cutting excessive pension payments and using those savings to pay teachers. Take California, whose California Public Employees Retirement System is facing shortfalls of half a trillion dollars. It’s not attempting to trim pension benefits for over 9,000 government workers collecting over $100,000. Instead, it wants money to avoid layoffs.

A better use of revenue from higher taxes on multinational corporations would be to extend expiring tax provisions that would benefit a broader swathe of the economy, including the private sector. This would offer more incentives for employers to create jobs.

Congress could lower the alternative minimum tax, a parallel tax system set up to catch high-income tax avoiders that now traps middle-class families. It could extend current personal and corporate income and capital gains tax rates, set to rise next January.

American businesses already face one of the highest corporate tax rates in the developed world, and countries such as the United Kingdom are cutting corporate tax rates in order to attract globally mobile companies.

 Grim picture, isn’t it?