$150 Billion Fix
Feeding the economy's worst habits
There’s something embarrassing — economically, politically, morally — about government bansheeing to give voters cash handouts disguised as economic stimulus. Does a couple with two kids, making $160,000, really deserve the same $900 as a single mother of one living on tips from her roadside diner job? Does a childless, single lawyer making $74,000 a year really need $600 from a federal government with a $163 billion deficit?
For that matter, it looks like my family — mother, father, two kids — will be getting at least $1,200. Can we use it? Sure, although we’ll end up saving it, which defeats the purpose of the stimulus. Assuming current job situations remain unchanged, do we need it more than possibly 70 million households that have it harder than we do? No. And most of this “stimulus” hand-out is going to people who don’t need it.
Economically the plan as the U.S. House of Representatives is due to pass it today is indefensible. Even if a cash injection into the economy had a chance of preventing a recession (it’s doubtful that anything short of China forgiving its $1.4 trillion loan to American consumers could have that effect), the injection the Bush administration wangled with Congress isn’t the way. Those who could use the money most in a downturn, not to spend it on consumer frivolities but to pay for basic needs, aren’t getting a dime. Some examples:
- Unemployment checks: Unemployment is at 5 percent, up from 4.4 percent a year ago. Unemployment checks run out after 26 weeks. The wanglers refused to extend the benefit even though unemployment checks tend to be immediately spent — and cushion the blow of unemployment to families a bit better than the lectures of labor officers.
- Job creation: Bush wouldn’t go for spending money on the nation’s poor infrastructure, which would have created jobs. The reason: The money would take too long to get back into the economy. In that case why the $50 billion in tax credits for business?
- Food stamps: One of the most underreported stories since 2005 is the surge in food prices. The International Monetary Fund reports a 75 percent price increase worldwide in three years, after inflation (which explains the $4.50 price tag for a gallon of milk here). Food stamps recipients have seen their benefits severely slashed as a result. Recession or not, they’re due for more benefits. The wanglers ignored them.
- Heating oil: Home heating oil was $2.30 a gallon a year ago. It was $3.33 a gallon last week, a 45 percent increase, with another 25 percent increase the Energy Department projects for this winter. The wanglers could have pumped more money into the $2.6 billion federal home-heating-oil subsidy, which would also be rapidly spent. They refused. (Last December Bush wanted to cut the subsidy by $379 million, Democrats increased it by $409 million. The 14 percent increase is dwarfed by the increases in the cost of oil, however.)
But couples making up to $150,000 will be getting $1,200, and couples without children, making up to $174,000, will be getting some of the hand-outs, as will single people making up to $75,000. The checks won’t be mailed until May, which further negates the effects of the package if the country is already in recession. But this is an election year. Instead of booze for votes, as was the old tradition going back to the Founders, it’s cash and tax credits.
In principle there’s nothing wrong with government intervention to direct the economy. Democrats since Franklin Roosevelt, if not Andrew Jackson, have intervened with equalization in mind. Republicans call that big-spending big government, even though the likes of Dwight Eisenhower and Richard Nixon weren’t above liberal tax and social policies for the greater good. Republicans since Ronald Reagan have a different definition of the greater good. It begins around the $100,000 tax brackets and goes up after that. Everyone below that bracket, which is to say 90 percent of taxpayers, is the smaller good and needn’t be worried about. As Kevin Phillips put it in “Wealth and Democracy” a few years ago, “the Jacksonian notion that government should not interfere on the side of the rich was reworked into the theorem that government had no business interfering on the side of the downtrodden.”
The stimulus is upper-bracket pandering, further encouraging one of the problems that led to this point: consumption on credit. But if Americans have been consuming on credit for the last 25 quarters in a row, they wouldn’t quit spending from running out of money, as the stimulus assumes. They’d quit from becoming fearful that the party may be over. If that’s the case, the stimulus, especially this stimulus, won’t make a difference. At least one party is over.