There seems to be all but universal agreement that some kind of economic stimulus program is needed to get our economy turned around. The question is specifically what should that stimulus include? Democrats in the House of Representatives just passed an $800 billion stimulus bill that some economists and almost all Republicans think is a mistake. I'm no economist and I'm a long way from a Republican, however, I agree with some of the criticisms levied against this legislation.
The main focus of this legislation should be to increase consumer spending and business expansion. Business expansion creates jobs and consumer spending creates demand, which encourages business expansion which again creates jobs. According to, Harvard economist, Martin Feldstein many of the dollars in the proposed stimulus package will not accomplish this purpose.
The package proposes tax rebated to business and to some tax payers. Given the environment of low demand and high job insecurity a tax rebate, Feldstein writes, will not be used by business to expand. They will simply sock the money away to be used later when condition are more business friendly. The same is true for people who receive a lump-sum tax rebate. Last year's lump-sum tax rebate were primarily used to pay down debt or was put into savings. The data show that only about 15 percent was actually used for additional spending. Instead of a cash tax rebate, it would be better to provide a real tax incentive to consumers who purchase automobiles, home appliances or make major home improvements. These things create spending, demand and jobs very quickly.
On the spending side of the stimulus bill there are also some problems. The bill includes millions for computerizing medical records of every American over the next several years. This is a very worthwhile project and I would support doing it, but not as part of our stimulus package. This is not a project that would result in new consumer demand or many new jobs.
The bill devotes a great deal of money to direct payment to states that may use the funds however the governor and state legislature wants. States receiving these funds may use it to create jobs or they might not.
A great deal of the $800 billion will go to infrastructure projects. Clearly, America's infrastructure needs work. However, the Congressional Budget Office estimates that less than $50 billion of these funds would be spent before the end of 2010. Of course, there needs to be some long-term aspects to our economic recovery plan, but the focus right now should be on raising consumer demand and jobs in the near term.
Feldman suggests spending on replacing and repairing military supplies and equipment. This is something badly needed after five years of fighting two wars. This would generate manufacturing jobs in very short order. In addition, spending on domestic military bases can be increased very quickly if Congress is willing to act. Doing this would create construction and manufacturing jobs.
What we need in this stimulus package is that most of the funds be specifically designated to industries and agencies that can create jobs and consumer demand in the near term. It is not that I think the current plan is too large. It is that I think it is not likely to be effective. What we don't want is an $800 billion mistake.
The House has passed a stimulus package. The Senate will begin its deliberation over it soon. I hope Senators of both parties will work together to produce a more focused stimulus package that will correct some of the glaring errors in the House version. The President is pushing for speed and I hope the Senate will act deliberately, but if Senators take their time and get it right, they will do the nation a real service.
We are increasing national debt at a rate that is unrecoverable anyway. Why not suspend the federal income tax for a year or two? Instead of filing taxes, file a spending report on what the money was "spent" on. Money spent....Not invested in the market, or in banks. Money spent on morgages, home improvements, cars, appliances, computers, TV's. Categorize it so that it makes sense. Put tax payers in 'spending brackets' rather than tax brackets. The money we are blowing on TARPS and stimulus bills far exceeds federal income tax revenue for the government anyway. Let the government go into debt by paying their salaries and absolute programs. Force them to really relook at their pork barrells and what federal funding should be cut.
How many billions get collected by the fed on income tax each year?
Why Not?
of the people, by the people, and for the people.....why does the government think they have the ability to FIX everything. Too many in DC were, and are, to big a part of the problem. Put it in the hands of the people, you might be surprised.
Suspend the federal income tax? Wow, that would be quite a step. The recovery plan, as proposed, has some targeted tax relief built in, but I don't think the government could even operate without the income tax. At least in my view, there are plenty of people who can afford to pay taxes. Let them pay. In my view, tax relief should be toward the middle class and lower class working people. They need the help.