Stimulus Killers

Dear Elephant-

Once again, George Bush Republicans have put partisan ideology ahead of economic reality by fighting against the most effective proposed stimulus measures. Yesterday, the executive director for the Center on Budget and Policy Priorities released this statement. The following is an excerpt:

Changes reportedly made last night in the stimulus package would reduce its effectiveness as stimulus. Although the package includes a reasonably designed tax rebate, the two most targeted and economically effective measures under consideration — a temporary extension of unemployment benefits and a temporary boost in food stamp benefits — were zeroed out, apparently at the insistence of House Republican leaders.

The two respected institutions that have rated stimulus options in recent days — the Congressional Budget Office and Moody’s Economy.com — both give their two highest ratings for effectiveness as stimulus to the two measures that were dropped.

-Of all tax and spending stimulus options that CBO examined, the only two that it found would have a large “bang-for-the-buck” as effective stimulus and act fast to boost the economy are the unemployment insurance and food stamp provisions. Both could start injecting more consumer purchasing power into the economy within one to two months. The planned tax rebate checks, in contrast, are not likely to be sent out until June.

-Economy.com found that for each dollar spent on extended UI benefits, $1.64 in increased economic activity would be generated. For each dollar in increased food stamp benefits, $1.73 in new economic activity would be generated. No other options rated as high.

-In contrast, Economy.com found that for each dollar in “accelerated depreciation” — the main business tax cut in the package — only 27 cents of increased economic activity would be generated. CBO and a Federal Reserve study in 2006 found that the business tax cuts adopted in the last recession, which closely resemble those in the current package, had only modest stimulative effects. Despite this evidence, the package apparently contains at least $50 billion in business tax cuts while excluding unemployment insurance — the single measure most focused on the people hardest hit by the downturn — and food stamps.

-The business tax cuts also would cause states to lose at least $4 billion in state revenue, due to linkages between federal and state tax codes. The package contains no fiscal relief for states, not even to offset this loss. As a result, many states will have to enact deeper and more painful budget cuts, likely hitting areas from health care and education to aid to local governments. Those state budget cuts will also act as a drag on the economy.

The unemployment insurance and food stamp provisions apparently were rejected by House Republican leaders, who reportedly said that the inclusion of spending measures would be unacceptable to the House Republican Caucus and would derail the package. Such a stance reflects the elevation of ideology over sound economic reasoning. As Nobel laureate Joseph Stiglitz and now-CBO director Peter Orszag wrote in late 2001, “Basic economic analysis indicates that increased government expenditures can indeed be stimulative, and, in fact, are often more effective as stimulus measures than tax cuts.”[1] This is because a significant portion of most tax cuts is saved rather than spent.

The statement does however praise the reasonably designed rebate provisions noting "The rebate component is vastly superior to the rebate proposal that the Administration developed last week, under which more than 25 million low- and moderate-income working families would have been shut out. Most of those families would get a substantial rebate under the new package."

Elephant, you tell me, do George Bush and the Republican party hate the working poor? Why do they consistently champion the interests of corporations over the interests of everyday Americans? It's not because of economics. It appears to be blind partisan ideology. And after watching last night's debate, its obvious that the new crop of candidates do not intend to deviate much from Bush economic policy. The same policy that has allowed and exacerbated the current economic slow down.

In 1992, Bill Clinton effectively ran against these ridiculous "trickle down" Reaganomic policies which had led the country into a recession at that time. If this downturn worsens and a recession is in full swing in November, you can look for Hillary Clinton (though I'm still hoping for Obama) to do the same. She will beat the Republican nominee like a piñata, and make the GOP pay for its heartless ideology.

Peace,

Donkey