by Senator Jim DeMint (R-SC) had some unpleasant words to say about the Democrat’s economic stimulus plan:
Not since the passage in 1909 of the 16th Amendment – which cleared the way for a federal income tax – has the United States seriously entertained a policy so comprehensively hostile to economic freedom, nor so arrogantly indifferent to economic reality. …
This bill is not a stimulus, ladies and gentlemen; it is a mugging. It is a fraud.
Elana Schor says that’s because DeMint wants to make the Bush tax cuts permanent and trots out the tired leftist line about tax reductions benefiting the rich. A little imagination, ‘Lana, please!
There couldn’t possibly be anything wrong with the Democrats’ plan, could there? Martin Feldstein, a conservative professor of economics at Harvard University, thinks so.
Feldstein says that he’s all for a stimulus package at this time. Just not this one. Seems the Obama stimulus plan won’t be stimulating the right nerve endings in the economy if it’s passed.
A summary of Feldstein’s findings:
- The plan is to give a tax cut of $500 a year for two years to each employed person. That’s not a good way to increase consumer spending.
- The proposed business tax cuts are also likely to do little to increase business investment and employment.
- The bonus depreciation plan would do little to raise capital spending in the current environment of weak demand
- Computerizing the medical records of every American over the next five years is desirable, but it is not a cost-effective way to create jobs.
- The largest proposed outlays amount to just writing unrestricted checks to state governments. Nearly $100 billion would result from increasing the “Medicaid matching rate,” a technique for reducing states’ Medicaid costs to free up state money for spending on anything governors and state legislators want. An additional $80 billion would be given out for “state fiscal relief.”
- The plan to finance health insurance premiums for the unemployed would actually increase unemployment by giving employers an incentive to lay off workers
Here’s what should be done instead, Feldstein says:
- Why not a temporary refundable tax credit to households that purchase cars or other major consumer durables
- If rapid spending on things that need to be done is a criterion of choice, the plan should include higher defense outlays, including replacing and repairing supplies and equipment, needed after five years of fighting.
- All new spending and tax changes should have explicit time limits that prevent ever-increasing additions to the national debt.
Obviously the purpose of an economic stimulus package is to jump-start the economy immediately, not years down the road. The plan passed by the House does not do that and should be rejected by the Senate.
Yet even Feldstein’s more palatable plan is made up of dubious objectives given the massive debt burden American taxpayers face as a result of past Congressional budget blunders that have resulted in a current $10T national debt and a total of unfunded future mandates totaling about $50T more.
Fundamentally the U.S. economy is in the dumper because of deficit spending by its government and citizens alike. Are we truly supposed to believe that even more spending is the way out?
The only way that can be true is if the additional spending now provides a net increase in real future wealth. But artificially maintaining high prices for goods, services, and stock prices is part of the problem. While doing so may be comforting now, it’s difficult to see how what can only be called a risky, short-term strategy can be the solution as well.
