Debating Stimulus

Editorial

Published January 25, 2008, issue of January 25, 2008.
  • Print
  • Share Share

The president and the congressional leaders appeared last week to have agreed in principle on a stimulus package of some $150 billion, or about 1% of the Gross Domestic Product, which should be enough to get a lot of people back to work. The two parties agree in broad terms on a package combining tax rebates, to get consumers buying again, with cash infusions aimed at specialized targets. That’s the good news.

The bad news is that the two sides are likely to collide over the critical question of who should get the money. The president wants to give an across-the-board tax rebate to anyone who paid taxes last year, rich or poor. He also wants to cut taxes on investments and capital gains — a perennial conservative favorite in good times and bad — in order to promote new investment and new jobs.

The Democrats favor a tax rebate for the poor and middle class, including those too poor to pay taxes, but not for the rich. In effect, they want to give spending money to those who don’t have it, not to those who do. Additionally, they want to increase food stamps and extend unemployment benefits beyond the current 26 weeks. They argue that targeting the lower income brackets will get the money circulating faster, since the poor, living closer to the edge, will rush out with their checks to buy the things they couldn’t afford last week.

In simpler terms, the two emergency plans actually amount to Washington business as usual: Bush would help the rich and the Democrats would help the poor.

The White House opposes the Democratic rebate plan in principle, because it argues that you can’t give a tax rebate back to someone who didn’t pay taxes in the first place. As for the Democrats’ other social spending, the president says the stimulus should go only to programs that will impact the economy directly.

The Democrats counter that giving money to working people will stimulate the economy more than giving to the rich. Those who have less to begin with will be quicker to run out with their new cash and buy things, which is the best way to boost demand and get the wheels turning.

As it happens, the Democrats have the facts on their side. A new study by Moody’s, the Wall Street rating firm, looked at past slowdowns and found that stimulus spending aimed at the poor actually gives more of an economic boost than aid to business and the affluent. As reported in the Associated Press, the study found that every stimulus dollar channeled to the poor — through extended unemployment, low-income tax breaks, subsidizing state programs and more — resulted in consumer spending increases of as much as $1.73. By contrast, each dollar directed to business tax breaks, high income rebates and the like resulted in less than a dollar of increased economic activity. If the president wants to target the direct consequences of economic slowdown, there’s no better place to begin.






Find us on Facebook!
  • You wouldn't think that a Soviet-Jewish immigrant would find much in common with Gabriel Garcia Marquez. But the famed novelist once helped one man find his first love. http://jd.fo/f3JiS
  • Can you relate?
  • The Forverts' "Bintel Brief" advice column ran for more than 65 years. Now it's getting a second life — as a cartoon.
  • Half of this Hillel's members believe Jesus was the Messiah.
  • Vinyl isn't just for hipsters and hippies. Israeli photographer Eilan Paz documents the most astonishing record collections from around the world:http://jd.fo/g3IyM
  • Could Spider-Man be Jewish? Andrew Garfield thinks so.
  • Most tasteless video ever? A new video shows Jesus Christ dying at Auschwitz.
  • "It’s the smell that hits me first — musty, almost sweet, emanating from the green felt that cradles each piece of silver cutlery in its own place." Only one week left to submit! Tell us the story of your family's Jewish heirloom.
  • Mazel tov to Chelsea Clinton and Marc Mezvinsky!
  • If it's true, it's pretty terrifying news.
  • “My mom went to cook at the White House and all I got was this tiny piece of leftover raspberry ganache."
  • Planning on catching "Fading Gigolo" this weekend? Read our review.
  • A new initiative will spend $300 million a year towards strengthening Israel's relationship with the Diaspora. http://jd.fo/q3Iaj Is this money spent wisely?
  • Lusia Horowitz left pre-state Israel to fight fascism in Spain — and wound up being captured by the Nazis and sent to die at Auschwitz. Share her remarkable story — told in her letters.
  • from-cache

Would you like to receive updates about new stories?




















We will not share your e-mail address or other personal information.

Already subscribed? Manage your subscription.