by William Neikirk
One big surprise in the debate over President Obama's $819 billion stimulus package is that Alice Rivlin and Martin Feldstein agree that it is a flawed plan that should be rewritten.
She's a liberal economist, the first director of the Congressional Budget Office, and a former member of the Federal Reserve. He's a former top economic adviser to Ronald Reagan and a big name among conservative economists. The likelihood that they would agree on most issues is slim.
Their observations deserve public attention and consideration by Obama and by the Senate, where the bill is moving slower.
In testimony before Congress a week ago, Rivlin said the stimulus package should be split so that long-term investments are stripped out of the measure, leaving only funds that would directly cause an increase in demand for goods and services.
She said these long-term investments "will not create many jobs right away" and "must be carefully planned to avoid waste." Many of these are infrastructure projects with a longer-term payoff, and could be taken up a later date.
In an op-ed story in the Washington Post, Feldstein took a similar approach, urging that the plan should be rewritten to include more funds that would increase consumer spending. "We cannot afford an $800 billion mistak," he said. He went even further than Rivlin, saying that the proposed tax cut of $500 a year for two years to each employed person is not a good way to boost consumer spending. It would cause people to use the money to pay down debt or salt it away in savings, he said.
Instead, Feldstein called for a temporary tax credit to households that purchase cars or other major consumer durables. It would be "refundable," meaning that people who don't pay taxes would get the credit. A temporary tax credit for home improvements also would be good, he said.
He added that lawmakers should go through the long list of appropriations for projects and ask how many jobs each would create per dollar of increased national debt. He said computerizing medical records over five years is desirable, "but it is not a cost-effective way to create jobs."
Experience teaches that Congress tends to throw in the kitchen sink when it takes up big money bills. As the "change" politician, Obama has an opportunity to stop that. Each dollar in the bill should be devoted to increasing consumer spending, central to economic growth.
Comments
What is it that they say? Opinions are like >>>>>>>'s everyone has one. There are also plenty of economists that say tax cuts aren't the answer either. They say they will simply pay off debt or hold on to it. Cutting business tax might not be the answer either. The shameful bonuses prove they will suck up the money themselves.
Posted by: bill r. | January 31, 2009 8:36 AM
"Feldstein took a similar approach, urging that the plan should be rewritten to include more funds that would increase consumer spending. "We cannot afford an $800 billion mistak," he said."
Where were you in October when Bush signed a $750 billion dollar mistake? That, so far, the banks have pretty much just stole from the American people.
At an average mortgage balance of, let's just say $200,000. That could have paid off 3,750,000 mortgages. If applied directly to mortgage relief, it's a win-win. People get to stay in their homes, and banks get the money. Re-opening credit.
The irresponsible lenders and borrowers are equally to blame. So, if there is going to be a bail-out, it should benefit both. I mean, think of the philosophy here. Americans are drowning in credit card and mortgage debt. So, we are giving banks money to be able to "re-open" credit. Isn't that like adding more water to the pool that someone is drowning in?
Lenders that receive funds should have to "forgive" the debt of the borrowers. "Homes, cars, credit cards, etc." Might as well just clear the books and start over.
That would help in many ways. Mainly, the banks get the government bail-out to help them transition to better lending practices. And by forgiving the debt of borrowers, you instantly open up a lot of room for consumer spending.
Posted by: Steve D | January 31, 2009 10:58 AM
So what are the economists saying:
Should the public SPEND their money?
or should the public SAVE their money?
An investment in home improvement will help the homeowner, help the stores, help the workers and help the manufacturers.
All home improvements should give homeowners a tax credit not just energy efficient improvements.
A one-issue (energy) will not succeed.
Posted by: Andy | January 31, 2009 11:08 AM
"It would be 'refundable,' meaning that people who don't pay taxes would get the credit."
Just because many people at the bottom of the income scale do not pay INCOME taxes, does NOT mean they 'DON'T PAY TAXES'.
This is a common fallacy in Republican arguments (used widely against Obama in the election campaign) that refundable tax credits involve 're-distributing' money toward the poor. These people still pay taxes, just not INCOME taxes, upon which the tax credit system is based.
This may simply be a harmless mistake, or the result of ignorance...either way it gives a false impression of what refundable tax credits actually do.
Posted by: Chris | January 31, 2009 4:05 PM
Hopefully BO has learned a valuable lesson - do not leave dimwit Pelosi in charge of anything. First her and Harry screwed up writing the TARP legislation (Bush signed-it) and now she writes this piece of fertilizer.
.
Hey BO - fool you once shame on Nancy, fool yoiu twice, shame on BO.
Posted by: Terry | January 31, 2009 8:44 PM
This looks like a perfect time to implement the "Flat Tax". Every working man and woman would take home everything the earned, every week. Giving them the extra money the government now takes. They would be able to spend this money on new cars, pay their mortgage, send their children to the school of their choice. They could also use some of the money for health care. And the government could use the money to payback the first stimulus package and start reducing the deficit.
Posted by: Paul | February 1, 2009 4:17 PM
Watch out for the Big Brother, folks!
Posted by: Sasha | February 2, 2009 5:25 PM
I definitely agree that the financial plan has to be looked into further. America definitely cannot afford another economic mishap.
I do agree that the time to act is now. As we are devising our financial plan and are ardently seeking to stimulate our economy, business owners need to see where they stand amidst this financial crisis, and start implementing change now. Not the - “hire a new staff so you can pay your minimum” type of change… Business owners need to be directly encouraged by economists and politicians alike, rather, to expand their staffs, market their industries, and promote integrity-based decisions on how they run their businesses. If you are not a business owner and are one who can’t find work - take what you can get! We need people off the streets, less people on welfare, more daycare services for mothers, less people sick for lack of insurance! Why? So that such people can finally have a bit of an upper hand and get BACK INTO THE WORKFORCE! Income tax is the single largest tax revenue for our government [approx. 50%] and it is only a matter of time before each new person entering the workforce has helped made a difference to rebuild that foundation. And the sooner we build that foundation, the quicker we will be able to have a basis on how to expand our larger economies [investments/loans/etc.] This means: help people get back on their feet, and essentially it will help the rest of our economy.
The next step in increasing our annual fiscal profits is, of course, by have people spend on consumer products, as it accounts for the government’s second largest amount of tax revenue [approx. 40%]. If you want to see more direct results - START SUPPORTING YOUR LOCAL ECONOMY! Every time you buy a product made from another country, our government and local businesses lose out on profit, which means our debt [and deficit] are ever-increasing. Though a rise in job availability, we can thoroughly increase the amount of consumer purchases people make. Essentially this will increase America’s spending capabilities and help our government pay back foreign loans though tax collection. If america has more capital in their pockets to spend, businesses will then have the capability to expand their companies and work with investors to further implement change in our ever-falling and unfortunately-failing economy.
Posted by: Vanessa M. Keszey | February 10, 2009 4:56 AM