Lets Jumpstart the Economy the Right Way
There is widespread bipartisan agreement in Washington that our economy is in need of a jumpstart. That is where the consensus ends.
When talks first began on how Congress should address the economic aftershocks in the wake of the September 11th terrorist attacks, there was unity of purpose. Further, there was a belief across party lines that our purpose transcended politics. People were hurting, families were struggling to survive layoffs and financial uncertainty, and our short and long-term economic prospects as a nation were spiraling in the wrong direction.
Unfortunately, the pledges to work together to craft an appropriate economic stimulus package have been broken. The House leadership has already engineered passage of a partisan stimulus plan that was more about stimulating its fundraising base than improving the economy. This wasn't a jumpstart, but rather an extension of the massive cut bill they passed earlier in the year. By any measure, that bill didn't boost our economy. It did, however, move us toward deficit spending after three years of paying down our nation's debt.
To be effective, any stimulus package must be responsible, targeted, and temporary. It must take effect immediately, be aimed at those who spend money on goods and services, and only last as long as the country needs it.
The bill that passed the House failed this test, and miserably so. First and foremost, its tax relief provisions are not targeted primarily at those who will spend and boost the economy. They include a permanent reduction of the capital gains tax, which benefits the top 2 percent of earners, and a permanent repeal of the Alternative Minimum Tax for corporations effective for the 2001 tax year, costing over $25 billion. Eight of the largest corporations in America would receive an enormous windfall, to the tune of over $5 billion. So much for fairness.
The plan also failed to address the need for swift unemployment and health insurance. It merely sped up the transfer of funding already slated to go to states, and imposed no requirement that it actually be used toward these purposes. That is a shell game, not an economic stimulus.
Nine Nobel Prize winning economists have impugned this package, saying "the stimulus package passed by the House of Representatives will do little to assist a near term recovery and is likely to undermine growth in the long term."
The key objective of any stimulus plan must be to expand the demand for goods and services. It must be balanced, including temporary individual and business tax cuts, as well as unemployment and health insurance assistance.
First, we should get cash immediately into the hands of those who will put it back into our economy. The stimulus bill should include a tax rebate for those who did not receive a full rebate, or received none at all, earlier this year. We should also increase the amount small businesses can deduct, which will help strengthen the bottom line of those along Main Street.
Second, we should help those laid off by passing a temporary expansion of unemployment benefits. By providing an additional 26 weeks to those who have exhausted their benefits, and increasing the benefit slightly, we can help families manage these tough times and also help the economy.
Third, we should provide health insurance assistance through temporary federal payment of COBRA continuation costs. This is not only the right thing to do, but it will also spur our recovery. Many who lose health insurance will either buy it, which limits their spending on goods and services, or will save their assets to guard against catastrophic health emergencies. By insuring those who lose their coverage, we can facilitate the infusion of spending into our struggling economy.
The need for swift action is clear. Our American economy was weakening before the tragic events of September 11. The unemployment rate had jumped from 3.9% to 4.9 % in just the preceding 11 months alone. We then saw 415,000 Americans lose their jobs in October alone, the most in a single month since May of 1980. Further, according to the Department of Labor, the number of people who exhausted their regular unemployment benefits in the third quarter of 2001 is 42% higher than one year ago.
It is past time for Congress to send the President an economic stimulus package. The package should be targeted, temporary, and responsible. The tragedy this nation has endured should not be exploited to enact irresponsible policies that do not achieve their stated purpose. Spurring our economy must be about people, not politics.