The Stimulus Package: The Tax Cuts Have Got to Go
The Stimulus Package (or as many Democrats want it called, the “recovery package”) passed the House of Representatives this last week on sharply partisan lines: 244-188. Now it is headed to the Senate for their version, which, at least according to preliminary reports, may include more spending on infrastructure. John Boehner (R-OH) noted that the Republican version of the bill would create more jobs than the Democratic one, “That’s twice as many as the [Democratic] bill that is on the [House] floor now for about half the price,” Boehner said.
The Republican talking points regarding the Stimulus Bill in the House seemed to have focused squarely on 2-3% of the provisions. Many of the stories surrounding the American Recovery and Reinvestment Act of 2009 delve little into the details and skim the true gut of the bill to the point where few Americans understand what $818 Billion of Tax-Payers money is going to be spent on, pending approval of a similar bill in the Senate.
The American Recovery and Reinvestment Act of 2009
- Federal tax cuts
- Expansion of Unemployment Insurance and other Social Safety Net Programs
- Domestic Investments in Education, Infrastructure and Health Care
The tax cuts as currently written are $500 per individual and $1000 per couple, and includes provisions for Higher Education to ensure students do not drop out of school due to financial hardship; and for first-time home-ownership, as an effort to spur the ice-cold Housing Market.
Education Investments, which have long been overdue, amount to $141.6 billion within the bill. Most of these provisions focus on stop-gap measures to help support state governments in their spending, and to help make Higher Education more affordable for families who may or may not make the choice of staying in college. The higher the drop-out rate, the more serious the implications for the long term viability of a high-tech, high-knowledge work force.
Additional welfare spending (which makes conservatives heads explode) is necessary to ensure that while these additional jobs are being created by the other spending included in the bill individuals are able to find a job that suits their skills, making them more efficient and have a greater viability and contributing at a higher rate to the 2009-2010 fiscal year GDP. Also, the costs of malnutrition, or death from homelessness and depression related to loss-of-job are high and this spending is used to mitigate many of those costs.
The Health care provisions of the bill are used to support Medicaid and digitize records. The jobs generated by the digitization of these records will be clerical, consistent and efficient. The digitization of records will save Americans billions annually and is a smart investment. Surprisingly there is $4.1 billion worth of prevention spending. This is very encouraging given that prevention will serve a key role when Health and Human Services Secretary Designate and White House Health Czar Tom Daschle shepherds Universal Health Care legislation through Congress.
Boehner Talking with the Caucus
In all, $90 billion is spent on infrastructure, including building and maintaining roads, the modernization of Government Buildings, and transit and rail. Less than 1/5th of the stimulus bill is currently geared towards infrastructure. Peter Defazio (D-OR), an unapologetic progressive and a man I respect, asks “How about investing in something that underlies the economy…the best budget of the Clinton Years was the first one that go no Republican votes.” A consumer-driven recovery is short-lived; we should invest for future generations. There is not enough here for infrastructure. That much is obvious. But how much investment in infrastructure should the bill take? Dollar for dollar, according to the White House’s own estimates, spending creates a greater return than tax cuts. Also, tax cuts may or may not be spent. Every dollar of this stimulus needs to be spent, and not saved to spur the economy. It is too dangerous a scenario to add all of these tax cuts to the bill with the possibility that a substantial amount may be saved by nervous consumers. According to Paul Krugman and a slew of economists, including White House estimates, tax cuts generate half of the total output that spending does.
If that is true, then wouldn’t the addition revenue in the economy allow for higher taxable revenues, furthering the goal of eventually balancing the budget and addressing our national debt that at its current rate is stifling? It’s a necessary question, and if the answer among many economists is that the spending can happen fast enough to offset the timeliness advantage of tax cuts, then the bill in the senate needs to be more focused on infrastructure spending rather then those cuts.
The President talks highly about infrastructure spending. Chicago has a $6 billion dollar deficit in their public transit, according to Defazio. They could easily spend $500 million tomorrow. It is time to begin an investment that will help make America more prepared, secure and able to compete in the 21st century.