The Senate is likely to pass its version of the President’s economic recovery plan today, and we will probably see a House-Senate conference version pass later this week. It’s been quite the circus: not a single Republican vote in the House, Obama’s first primetime press conference, and El Rushbo deciding he doesn’t love America after all. Here’s my two cents: First of all, love it or hate it – and I hate it – a spending-heavy recovery plan is probably necessary. Secondly, I’m a big fan of bipartisanship, and the President has done just about all you can ask of him in that regard. Congressional Republicans need to realize: they lost. This is a bipartisan bill, and they’d better take it if they want to keep their current seat at the table.
So first things first, the bill itself. I don’t think we should try to save the Titanic with this thing; there aren’t any boats large enough to tow her safely in. No, I just want to get all the passengers off before she goes under. The fact is, our economy is artificially big. It didn’t get to where it is through natural growth but by Wall Street smoke and mirrors, a disgusting pay gap that made the stock market seem more important it was, two expensive wars, much too much consumer spending (Americans save an average of less than one percent!), and a federal government spending several hundred billion more than it has. How can you sustain that kind of an economy? No, this particular economic structure is not salvageable. We can only hope to let it down gently rather than catastrophically, then build it back in a safer, more sustainable way. We need a slight recession to get us back on track, but there’s no need for massive job loss or rapid –flation, be it de- or in-. Now, as a member of the generation that’s going to have to pay back the Reagan-Bush debt, I’m a real deficit hawk. Unfortunately, while I am wary of the stimulus package’s cost, economists do seem to deem it necessary. Some don’t even think the $830 billion price tag is enough: Nobel laureate Paul Krugman says the problem is more along the lines of $3 trillion. I think I’ll stick with the $800 billion, thankyouverymuch, and if our country will collapse without a second round, we can come back to it.
But what should that $800 billion look like? We’ll have to spend, hopefully on green jobs and infrastructure needs. Those are two of my own pet causes so I readily admit there are probably many other job-creating areas that will do an equally effective job of stimulating the economy. Unemployment benefits and state budget assistance are obviously musts. Maybe we could work on solving the nursing shortage and repairing dilapidated rural and inner city school facilities.
But that is the way to go: massive job creation and limited capital infusion. Tax cuts are silly, for three reasons. One, the deficit. Two, we’ve already had plenty. If you look at 20th century history, you’ll see that taxes are comparatively pretty low right now. Any more cuts and we’ll never be able to pay for our corporate needs. And perhaps most importantly, three, there are better ways to stimulate the economy. According to the noted Jeffrey Sachs,
Comparing the House and Senate versions, the Senate version is clearly worse: more tax cuts, less infrastructure, and less in transfers to state and local governments… Immediate and sizable spending increases in the stimulus package should be directed to a few areas: significant support for our crisis-ridden state and local governments [just what got cut in the Senate], especially for health (Medicaid), education, and other urgent public services; income support (unemployment, anti-poverty including food stamps and child nutrition); health care coverage for the uninsured (as well as adequate Medicaid funding mentioned earlier); and a significant multi-year rollout of infrastructure of all sorts (roads, rail, other mass transit, ports, water, energy, broadband, etc.)
The non-partisan Congressional Budget Office (CBO) agrees. According to the CBO, “A one-time increase in federal purchases of goods and services of $1.00 in the second quarter of this year would raise GDP by [a low estimate of] $1.00 to [a high estimate of] $2.50 in total over several quarters.” The numbers on state assistance are identical. Middle and lower class tax-cuts, on the other hand, have a benefit of only $0.50 to $1.70, and tax cuts for the rich (every conservative Congressman’s favorite) are even worse at $0.10 to $0.50. Tax cuts may been an effective way to help the economy when the top tax bracket was above 50%, but anyone who thinks there’s no economic difference between a 50% rate and a 36% rate is just being foolish.
(If you've already read this post - I deleted the last three paragraphs, the ones railing against House Democrats, to make it shorter.)