(UPDATE: I’ve added a link to the current stimulus package, H.R. 1, as passed in the House on 27 Jaunary, 2008. It’s a full PDF text, all 647 pages of it. May comment on it later, as I’m currently attempting to pour over it).
As the economy continues tit’s downward spiral amid news of very large companies laying off workers (even the U.S. Post Office is considering reducing it’s service!), we have been bombarded with loud protestations from the Conservatives: Obama’s proposed plan is:
- Not enough, and
- Not what he promised
Last night, while thinking about the debacle with companies spending all this free money for themselves, rather than to help out their own situations, I suddenly had an idea that I heard repeated by Gwen Ifill this morning on MSNBC’s Morning Joe. Rather than give the money straight to the businesses, (such as Bank of America, for instance), why not pay their debtors? If a bank says “Help! we’re stuck with too many defaulting subprime mortgages”, then pay off those mortgages. This benefits both the family facing foreclosure, and restabilizes the bank’s balance sheet.
If an auto manufacturer says “Help! We can’t pay our workers, not enough people are buying cars!”, perhaps you might consider helping them with plans to develop or improve their cheaper, more fuel efficient models. This helps prepare the company for the greener future Barack Obama promised, encourages those who can afford a car whose gas consumption isn’t as high as the monthly car payments, and perhaps stimulates some degree of retraining for workers who will better be able to work in the new economy.
You get the idea. That’s direct stimulation, which is what we had been promised.
Part two of the stimulus should, without a doubt, create new jobs, lots and lots of them. It is a known fact that America’s transportation, water and sewage, and electrical infrastructure, is in woeful need of repair ((See also: The American Society of Civil Engineers)). The fact of the matter is, even if the economy hadn’t been a tailspin, this is work that is very, very, very overdue. The escalating job losses actually create the kind of wonderful opportunity upon which FDR wisely seized back in the 1930’s.
These are the promises that sealed the deal in the 2008 Presidential election, and this is the kind of thing we are still waiting for.
According to The Washington Post, very little of this money will actually be spent this year. A large portion of it, in fact, will come in the form of tax cuts, which sound good to everyone who hates paying taxes in the first place, but here’s the rub:
To be genuinely stimulating, tax cuts need to be immediate, permanent and on the “margin,” meaning that they apply to the next dollar of income that an individual or business earns. This was the principle behind the Kennedy tax cuts of 1964, as well as the Reagan tax cuts of 1981, which finally took full effect on January 1, 1983. ((Source: The Wall Street Journal, “The Stimulus Time Machine“))
Later this week, the Congressional Budget Office is expected to update it’s information regarding the stimulus package of 2009. ((Look for H.R. 1, American Recovery and Reinvestment Act of 2009)) ((Also, see the full PDF text (all 647 pages!) of H.R. 1 at <a href="http://www.rules.house.gov/111/LegText/111_hr1_text.pdf" rel="shadowbox" title="H.R. 1 Full text (PDF))) I’m no economist, I know very little about how money markets and the like work, but I do know this: I need to keep my job, businesses need to be successful enough to have websites my husband can design and maintain, people need to be able to afford the health and beauty products I have to sell, all of which needs to happen in a world that is more sustainable, more hopeful, and more enlightened for my children.
The reality is, although the government CAN help fix the economy, it’s certainly not going to be quick. The simple fact that government programs and projects require oversight, which in turn requires drafting of rules and plans, means the strongest impact from any government action will not even begin to be felt until summer. Which brings me back to the beginning of my post: the fastest way to help our collective selves out is to pay the bills:
- pay off or buy back loans in default;
- pay off creditors;
- reduce credit card debt (perhaps by freezing or forgiving, say, six months’ worth of interest fees);
- create jobs NOW.
- Be ready for another stimulus package for longer term projects.
Next, start work on infrastructure. Obama talked a good game between the election and his inauguration, but the bill that passed the senate tonight appears to be nowhere near what he talked about. Perhaps, in an effort for by-partisanship, he watered it down; but sometimes a leader has to lead by the stroke of the overrule: he must be aware that his ideas on fixing the economy are the correct ones. We can’t afford disasters such as the Minnesota bridge collapse, or failing levies along the Gulf Coast region. We can’t wait for accidents with untreated water from the outdated, decrepit sewer systems in New York. ((See also: The Democrat and Chronicle N.Y. seeks federal help…))
I know it’s a complex proposition, but it’s not exactly rocket science, either.
So why is it all depressing? Well, for starters, not a SINGLE Republican voted for the bill, in spite of Democratic effort to compromise with their requests and demands. Republicans complain it’s too full of… the “wrong things” (for lack of a better term): too many “inappropriate or useless” tax cuts, not enough infrastructure spending, and on and on. However, their obvious partisanship belies their commentaries. Not a single Republican thought this bill was worthy of passing on to the House? Really? I doubt it. This suggests Democrats may as well go back to most of their original plan and let their House colleagues do the right thing. Might as well, they have the bully pulpit anyway.
Secondly, there is real concern from the part of very knowledgeable and respected economists of various political convictions that the size of this bill really is not enough. Jim Cramer (who is not an economist, but a former hedge fund manager) pointed out that China, one of most fiscally conservative nations on the planet, is going about their stimulus program much more aggressively. He added this (and I paraphrase):
“Boston alone could chew through that money in a year!” Ben Stein is equally unhappy, saying on Hardball with Chris Matthews that it’s “not enough”.
Meantime, globally the outlook is still bleak, with Global gross domestic product set to actually decrease for the first time in years. Stephen Roach, an economist and chairman of Morgan Stanley Asia, speaking at the Davos World Economic Forum in Switzerland, isn’t calling the present situation a “depression,” but a “global recession the likes of which we’ve never seen.”
Now that is depressing. ((Track where the money from H.R. 1 goes at Recovery.gov))