Thursday, February 5, 2009

What's So Hard About This?

Debates concerning the right mixture of tax cuts vs. public spending in the economic recovery package are, of course, trending along partisan lines. It's not necessarily a bad thing. The issue seems to be what one believes the stimulus is supposed to accomplish.

If in the short term one believes the economy can be jump started through immediate spending, it would seem that the creation of jobs and the funding of public projects would have the quickest impact. Again, it seems to me that the argument that weighting the stimulus towards the middle class (really what we used to call 'upper' middle class) and corporations because that would free up capital and create jobs, lost credibility over the past four years. Or are we forgetting that this was philosophy that killed off more than 2.5 million jobs by the end of last year alone?

If it's true that this current economic crisis calls for people to spend, does it make much sense to put the money meant for recovery into the hands of people who will save it?

According to the Economic Policy Institute, the most 'bang for the buck' for every public dollar spent would come from food stamps. Yep they spend just like real money! And people don't save food stamps. And for every dollar spent in food stamps it would return $1.73 to the economy. By the same token, making dividends and capital gains tax cuts permanent only provides a benefit of 37 cents. And should the Bush tax cuts be made permenant there would be a whopping 29 cent boost per dollar of tax cuts! How many of those three dimes have to 'trickle down' before we pulled out of this mess? For a more extensive comparison check the graph:

Given the state of the economy, people need work, they need to be reasonably certain that they can take care of daily necessities. There's no evidence that lump sum payments will be any more effective than last year's rebates.

Nothing done right now can serve a silver bullet. But this time those who've been left behind during the past eight years are the ones who will help dig the country out of the current financial disaster. Congress needs to give them the tools to get started.

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