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Will Bush's Stimulus Package Work? It Depends on Who You Ask
As the middle and poorer classes get crushed under a mounting pile of debt, and living costs grow faster than wages, we're becoming a country of two classes: the top 1% and everyone else. Similarly, we are two economies. The national one is comprised of items like GDP (Gross Domestic Product), corporate profits, stock market performance and CNBC. Then, there's the other one in which most people live: stretching to afford health care, a mortgage, commuting costs, education, kids, parents, and the credit cards that act as temporary pain killers.
The rhetoric surrounding George W. Bush's economic stimulus package, as boastfully "bi-partisan" as it is (we are, after all, in an election year), indicates a complete lack of comprehension of the difference between this 'national' economy and the 'people's' economy, and the extent of the gap between the two.
The unveiling of his plan was classic Bush: state something ambiguous about a $140 billion adrenaline shot, then have your cronies act as wingmen. Hence, at last Friday's press conference, Treasury Secretary and former Goldman Sachs CEO, Hank Paulson was left fending off uncomfortable questions like: would the plan help "elderly people on fixed incomes?" His answer: "The Christmas season has come and gone."
The national economy, as measured by large scale figures simply does not represent individual citizens' economic circumstances. That's why debate over whether we are in a recession or not misses the point of everyday financial realities for most of the population. According to the standard definition of recession (two quarters or more of a decline in GDP), we're not there. In which case, Bush and Paulson are technically right in saying the economy is simply 'slow'.
But, that's been far from the case if we consider the people's economy (the people - as in all the American citizens who don't fall into that upper percent of the nation's wealth bracket). And very little in the President's, or in most of the presidential candidates' plans, will change this.
The highest bidder mentality of Wall Street and its elite private equity groups has exacerbated the sub prime and regular housing market crisis. As investment banks stuffed loans into packages of toxic speculative waste, actual people lost their homes, hurt further by media attention on those declining home values, which didn't thrill new buyers.
In the process of trying to keep up escalating payments on their homes and home equity loans (backed by falling home values), people increased their credit card balances, suffering requisite late fees and higher rates, and ravaging 401K plans in desperation, during a time in which the values of those plans shrunk along with the falling stock market.
Don't get me wrong. No one would scoff at an $800 tax rebate check in the mail, but at best, it may provide a month of relief. Meanwhile, it does nothing strategically to fix the barrage of corporate gouging that continues unabated and unregulated by the Washington powers that be (including those running for office). Seriously, wouldn't it kill you if your health insurance premium rose just as you were about to cash that government rebate?
Home prices fell by a record 6.7% over the year and with legions of unsold homes on the market, they won't be rising any time soon. The largest mortgage lenders are trying to sell themselves to the banks that once funded them. And banks keep writing down loan values on their books faster than you can say "class action lawsuit." Credit card companies are starting to see the late payment and defaults that happen when people have maxed out their cards to pay their rising mortgages.
Unemployment has jumped to 5%, or 2001 'recession' levels. And, if more firms fire more employees to 'cut expenses', that number will rise. This means people will buy less, which will hurt corporations, who will then fire more people.
We can debate forever whether the average $300 tax rebate in 2001 that the administration claims stimulated the economy did or not. (We can debate whether a similar rebate will or will not this time around.)
But whatever it achieved for the national corporate economy, it did not halt the rise in basic living expenses, health care costs or tuition. More than one out of five middle-class families have less than $100 per week remaining after paying for basic living expenses. In nearly one out of four middle-class families, at least one family member lacks health insurance. And almost one in three families doesn't have more than a high-school education.
It did not put a leash on credit card companies. American credit card debt has tripled in the past two decades, with African American and Latino households carrying a higher percentage of debt than White ones. Americans over 65, targeted by predatory credit card companies, experienced the greatest increase in debt carried. Meanwhile, industry deregulation means there are no rate or fee caps. Credit card issuers raked in $8 billion of fees between 2004 and 2005. To cope with the rising credit card debt, Americans raided the equity in their homes, whose values seemed to be only rising - until they stopped. From 2001 to 2006, homeowners cashed out $1.2 trillion in equity. Those loans will need to be repaid.
It did not halt the increase in the wealth gap. Over the past two decades, wealth in the top 2% of the country has doubled; in the bottom quarter, it has declined.
It did not halt the fraud or questionable lending practices of the housing market players. The list of investigations has just begun.
It did not halt the decrease in average American wages per hour.
It did not halt the unemployment gap between white and black Americans. In general, the black unemployment rate is twice that of whites, more in recessionary times. The black prison rate also rises with the unemployment gap.
It did not halt the life expectancy gap. The rich live longer than the poor by 6 years.
It did not halt the deletion of employee retirement plans. Only one out of five private sector workers has a traditional pension. It did not replenish the Social Security system. None of the candidates has addressed pensions or social security in any meaningful way - saying 'we'll fix it' is not meaningful.
Bush acknowledged that "continued instability in the housing and financial markets could cause additional harm to our overall economy." However this is a convenient excuse to push his last economic hurrah - making his tax cuts permanent. The president behind the biggest corporate tax breaks in two decades also wants to "bolster business investment and consumer spending." That doesn't mean he cares about the average person's quality of life.
But, we don't expect more from him. From the 'candidates of change' however, we should demand more meaningful policy that truly enriches the main street economy.
Cap credit card rates and fees, and make credit card companies offer repayment schemes at lower rates that aren't designed to further screw borrowers. Remove prepayment penalties for primary homebuyers and make banks proactively extend offers on loans with reduced interest rates (now at 2005 levels).
(Note to my bank: how come you're not passing on the love from today's 75 basis point rate cut to my mortgage rate?)
Get rid of insurance companies as an impediment to affordable health care. Either shift the burden of retirement risk back to the corporations that get the tax breaks, or don't give them tax breaks. Increase the education budget dramatically, so that more minorities, working poor and middle class can get advanced degrees. Tax private equity titans at the same levels as regular citizens.
Place the focus back on the majority of the population: increase collective wealth and not the wealth gap, and GDP will follow - on a more stable, long term platform.
Nomi Prins is a journalist and Senior Fellow at Demos, a non-partisan public policy research and advocacy organization. She is the author of Other People's Money: The Corporate Mugging of America and Jacked: How "Conservatives" are Picking your Pocket (whether you voted for them or not).
Copyright © 2008 The Women's International Perspective
34 Comments so far
Show AllThe stimulus package will work to put Americans deeper in debt, by extending their credit line and loaning them money that the goverment doesn't have. ENJOY!
EDWARDS '08
"Tax rebate check."
That says it all. If you don't make enough money to pay taxes, you don't get a check. I didn't get the last check, either.
Once again, those on the economic bottom are left for the sharks. Those in the top 1% will no doubt have their "Just Us," as this $140 billion makes its diffuse way, like helium, into the pockets of those at the top.
I hate to repost (I posted this on Barb's article) but here it goes:
Unemployment comp, of course. Food assistance, yes. Housing assistance, absolutely. But I think the things that are hobbling folks on a day to day, month to month basis are the EXHORBITANT interest rates they are paying on consumer loans. The tens and hundreds of dollars going to the Banks, every month, for money they only pay 4% for. Criminal!
We need to set rate limits for mortgages and consumer loans (credit cards, auto loans, etc.) and amend the debt-slavery inducing Bankruptcy Bill. These two things would unchain a lot of people from the cycle of debt and debt only enriches the corrupt Banks/Investment firms who sold electrons flitting in cyberspace to fleece the world. Unshackled from debt, the average household could afford to SAVE money AND SPEND money. Everyone is tapped out, working two Mcjobs ain't gonna pull us out of that. In addition, NAFTA, GATT and other "free trade" deals have exported our vital production needs and living wage jobs.
Screw what these economists and MBAs say or do. They're the ones who fucked this all up, why should we be bailing them out at all? Parasites.
The Democratic Party leadership will likely characterize the stimulus package as a bi-partisan success, just as they characterized the recent energy bill as a bi-partisan success.
Unfortunately, the energy bill provides taxpayer funded corporate welfare for nuclear, fossil fuel and ethanol and will increase foreign oil imports, despite including the term "energy security" in the bill's title. The bill excluded renewable enegy sources that would have reduced foreign oil imports.
As much as I hope I am wrong on this, the Democratic Party leadership has proven to be way too predictable.
I am often criticized here for pointing out the political usefulness of Democrats. If you still had the Republican Congress that passed the Bush tax cuts of 2003, it is an absolute slam-dunk that the "Bush" stimulus package this time around would be making all of those top-end cuts permanent. Bill Frist and Tom Delay and Denny Hastert and the ole gang would be all over this telling YOU that these actions would fix everything and passing it over YOUR better judgment in a heartbeat. Checks to poor citizens? Not so much.
Because they all know (knew, thankfully past-tense) that trickle-down is so much better.
Of course the stimulus won't work. It's just a way to sneak in more corporate tax breaks, which will have a lasting (and deleterious) effect, producing only an ephemeral/marginal bump to the lower- and middle-class. It'll also introduce a further "moral hazard" in which people's actions (whether foolish consumers or criminal lenders) are not properly penalized for their behavior. Jail the lenders -- but let the borrowers think twice about doing that again.
The underlying reasons why they need money in their pockets isn't addressed by any stimulus suggestion I've read. Real estate ought to be dirt cheap, since we all need a place to live -- and shouldn't be shipping the lion's share of our income to simply prevent ourselves from being evicted. But if people go broke because they buy too many depreciating consumer goods, that's their problem.
It's always funny when someone suggests that one of bush's plans will work.
The American public (the 98%) is economic fodder for the wealthy (the 2%).
De-regulation of the financial industry has handed more power to the wealthy.
De-regulation of media ownership has handed a greater voice to the wealthy.
Campaign financing has provided the wealthy control of political debate.
There is no "land of the free." That land has been sold, it started with Reagan. There was class warfare, but that war is over - the wealthy won it. And the political arm of the wealthy are predominately conservatives and Republicans.
Bush's plans ALWAYS WORK. They transfer more wealth from the 99% to the 1%. No previous president has been nearly as successful in achieving that.
It's the GDP stupid! As long as GDP remains the standard by which economic sucess is measured, gross inequity will exist. Economic trends in history will ratify the fact that as the gap in equity between the top and bottom layers of society grows, the chances increase logarithmically that economic and societal pressures will cause a collapse of both the economy and the society involved.
Time to envision a new future now! The empire is punch drunk and staggering. Should we go for the knock out punch?
We must make plans for our communities to become self-reliant and equitable now if we are to thrive in a future beyond the empire.
DEMS? still mostly useless. This bi-partisan B.S. has no chance to help the economy as a whole. Just the fact Pelosi and Reid get behind a failure of a plan to prevent them from looking like their doing nothing doesn't obscure the fact that they're doing nothing. Edwards at least has a clue - does anyone think he will be the nominee? Let's face it, the media has just about moved him offstage with DK.
I just had a trickle down.....my leg! Feels wet. George Bush is nothing but shit with skin on it....
The problem is the structural need this country's economy has for consumer spending. While it might be better to rebuild things so we have a better balance over all, the slowing demand wouldn't be happening if the minimum wage were $15 an hour. If people earned that, of course much of it would get spent. And hell, some of it might get saved.
It was Hillary's husband who signed the deregulation law that got us here. Sometimes it's hard to tell which one of them is running for president. I can hardly wait for more of the same.
I liked Paulson's answer to being asked if the Bush "stimulus" plan will help the elderly. Translation: no. And it won't alter the course we're on, but a check arriving right before the election will be like giving a drink to a drunk, make people forget their pain when entering the voting booth. And the idiot Democrats are going along with it, even to the point of forgoing investigations of criminal behavior in the spirit of bipartisanship. Does this sound like more Democrats is the answer to our problems?
kathyodat
And consider this: the largest nonvoting population is too poor to pay taxes, so the stimulus plan is cost efficient as well.
kathyodat
There are two very good articles today that point out why any stimulus plan will fail, http://www.atimes.com/atimes/Global_Economy/JA24Dj01.html and Chalmers Johnson's here at CD; it just amounts to BAU corporate welfare dressed as a middle class bailout.
My Bailout proposal: Eliminate $400,000,000,000 in "defense" spending and allocate it to the poorest 75,000,000 households--$5,333.33 each. Reset tax rates to those of 1978, eliminate a further $500,000,000,000 in "defense" spending and establish a firstclass single-payer healh system. Mandate 100,000,000 Solar Roofs (both thermal and electric) and wind machines of this type, http://www.windside.com/index.html while intituting a carbon and "offshoring" tax. Half of the usual corporate subsidy is redirected, which forces corporations to change if they still covet the largess; about 1/4 is redistributed through the new tax and medical care regime; and the remaining 1/4 goes to pay the debt.
The above would be a start toward a new paradigm; and we must start somewhere.
The economy is the means by which real resources get distributed amoungst everyone. It so happens that the cost of real resources is going up, due to the foundational affects of oil, the general indebtedness of the nation due to war. Even the quality basics of life such as food are becoming scarcer. With such great inequality of wealth, those who rule will not feel the pain. Either society becomes better organized for efficiency of distribution and cooperative help, and provision of real human social needs, or you continue to derive false benefit from cheap consumer trash and stay divided as societies. Rich off-shoring corporations are not contributing any help. Stop buying global and increase your local economies. Invest in yourselves and the people you know. Otherwise the US of I is more like the third world to rich global corporations.
why can't people see it for what it is? call it for what is is...it's a bribe on a massive scale.
by accepting g.w. bush's bribes, you are essentially capitulating to eveything he stands for, just like the democrats.
HELLO DARLING: That's how I see it, too! A ridiculous band aid applied to a dam bursting!
I see little discussion of the obvious result of the "stimulus package" - putting cash in the pockets of working people courtesy of "The Republicans" greases the skids for another Repugnicant victory in the fall. The old myth of "Dems want to pick your pockets; Repubs want to give you back some of what they took" is reinforced, even as those well-gorged heffalumps outspend FDR and LBJ combined (or so it seems to me , and why shouldn't that myth gain some traction? "Bush Repubs spend more than all Dems combined"... it's as true as WMDs, maybe truer).
That said, gimme my rebate! I gotta get some dang heating oil!
¿ How about we stimulate some justice,
and lock the bankers up until the economy improves?
I imagine that the pure joy released by the people seeing
the bankers in jail, would cure the depression rather quickly.
Similarly, for impeachment (which is actually hundreds of times more likely)
NSPIRE: I like your plan!
Cap Prices! If Dick Nixon can do it, then why can't our pathetic Democrats even propose it. Why have us borrow money and give it to the same thieves who caused this mess in the first place?
Imagine the effect of buck fifty gas. Of insurance premiums not going up to absorb any raise we would have otherwise gotten.
We ought to use democracy for what it was designed for. Holding the robber barons in check. Oddly they would be much better off if we did, and of course everyone else would.
Here is my suggestions: Start off by imposing penalties on those companies who offshored all the jobs that Americans used to have. Get rid of NAFTA, CAFTA, and GATT. Reinstitute tarriffs on imported goods so that goods made in this country stand a chance against those from China and southeast Asia. Nationalize healthcare, and repeal the Reagan era tax cuts. Stop the war in Iraq and the wars against our own citizens (drugs, etc). Institute a nationalized educational system that provides college and upper degrees for a reasonable cost (ie, heavily subsidized). Implement a national strategy of alternative energy and bring back the JOBS and wages that will allow Americans to save and spend without massive debt. Take us OFF of Alzheimer's economics, Oh, sorry, Reaganomics, and put us back onto a path that can be explained with LOGIC instead of pie in the sky lying.
Reaganomics was a lie when it was proposed, and it needs to be discarded like the class war that it was. The rich, who have benefitted massively from the last 27 years of misdirection, need to be put back in their place and made to pay for the damage they have done to the rest of the country and the world.
America used to be great because it didn't fear things. Now we fear everything and everyone. This is a travesty, and it needs to be reversed immediately. It took the republicans (and I DO include Clinton in that list) 25 years to destroy what America built in the previous 200. It's time they are made to pay that back and FIX something instead of just bad mouthing the rest of us.
WJM says: America used to be great when it didn't fear things...
Was America great when it fearlessly killed off the native population?
Or would you be referring to the fearless importation of slaves.
I personally like the fearless theft of hawaii, and one third of Mexico, and the fearless massacre of filipinos presuming to defend their country. The fearlessness of America has also been apparent in its overthrow of governments trying to help the people, and in its fearless pilots dropping missiles miles from their target, or from the safety of their living rooms stateside. A fearful America sounds pretty good to me.
America cheated, was lucky, stole hand over fist and overindulged. Greatness? Every country that came under its control went into extreme poverty. If the US was ever great, then leeches are magnificent. You are confusing plumpness with greatness.
Plump America is destined to lose weight.
WJM January 23rd, 2008 10:09 pm
"Here is my suggestions: Start off by imposing penalties on those companies who offshored all the jobs that Americans used to have. Get rid of NAFTA, CAFTA, and GATT."
Actually the Government has encouraged companies to move overseas.
Lobo Gris
Let me state my bewilderment: the federal government borrowing yet more money on top of our obscene national debt is going to improve the economy how?
Since we are overspent already, any program mentioning spending money is about borrowing money. Isn't excessive borrowing the fundamental problem the intended target of the new borrowing proposed? If I'm head over heels in debt is more debt my way out?
When one discovers oneself digging a hole, the very first thing to do is to:
S T O P
D I G G I N G
nspire:
I've said, only half-jokingly (I shall not say which half is the side of irony), that our way out of this mess may be easier, now, if the bottom falls out rather than by climbing out of the hole.
The Dems are here in '08 to rescue the Republicans, the gamed system that they butcher when it is fattened. At times I think the best thing for this country would actually be a couple more terms of Bush & Cheney. We'll need better than a band-aid to fix this mess.
It's time to start over. If there's a revolution, I have no interest being in the thick of it. But I'll be happy to be at the table when the dust settles, and keen minds are needed to create a modern democracy, America 2.0.
The very best stimulus package gov't could come up with would be to LOWER the corporate tax rate. As unpopular and distasteful as that sounds on the face of it, the fact remains that it is true. If businesses were given the ability to retain more of their earnings in the form of lower taxes, they would reinvest into their own companies which would result in MORE jobs which would help ALL.
Even Europe's most liberal states are engaging in tax competition. Sweden used to have a 60 percent corporate tax rate, but it has been reduced to 28 percent. Norway's rate has fallen from more than 50 percent to 28 percent as well. These are not isolated examples. The average corporate tax rate in the European Union is now 26 percent. In the last five years, at least 16 European Union nations have dropped their statutory tax rate on corporate income.
There is every reason to think that nations will continue to lower corporate tax rates. The United Kingdom just announced a plan to drop its rate from 30 percent to 28 percent. Germany is in the process of reducing its rate from nearly 40 percent to less than 30 percent. The new French President wants to bring his nation's corporate rate down from 33 percent to 28 percent
Like it or not, it's American's companies, big and small, that employ the majority us and give us benefits. If we continue to strangle them with onerous taxation, that will contract rather than expand.
Lower tax rates boost growth and improve tax compliance. Tax reform can simplify complex tax regimes and liberate businesses to focus on creating jobs and wealth. If you disagree you should look at places like Estonia, Hong Kong, and Switzerland to see how good policy generates good results.
I'll get lots of flames for this viewpoint, but it's the way I see it.
The "package" proposed by Bush will not work. Remember, the check with the devalued $$$ will have to be reported to the IRS as income,how is this going to help me? What's needed is the restoration of the US middle class which disappeared during the reign of Bush the First, faithfully followed by Clinton with NAFTA, a president who lied under oath, campaigning with his neo-con wife who wants to claim a dynasty as woman president. First order of business: put people back to work; open the factories that ilegally went overseas, tax the bastards if they don't comply,give incentives to small businesses, consolidations and take-over companies to increase profits are "verboten",it creates job losses; increase the tax burden to the super-rich; no lobbies in Congress, no "pork" to the politicians; no political campaign contributions; lower the high salaries of all "elected" officials including yours, Mr. President, if we the people of the US have been tightening our belts for years, so can you. Instead of giving us that miser check, pool the money and house the homeless, the destitutes who lost their homes and are living in cars, feed the hungry. Now, Mr. President: how can you sleep every night when 20 million Americans: children,the elderly, the returning soldiers, go hungry every night? Now you know where to "shove" your package.
How about a tax credit for the points and fees paid to refinance to a lower rate and more affordable payment? That might actually be beneficial.
PAUL B -- Is the bottom falling out (of the hole) the same as going all the way to "china"?
I am a big picture sort of person, and warily acknowledge that due to the current depth of depravity and insidious wickedness, that falling from a greater height may be required to kill off more of the beast. Half-baked measures will yield less than half way successes.
Because we carry the seeds of its re-birth along with us, the price of freedom will again be eternal vigilance.
May Peace eventually find the survivors
Namaste … … … … … … … … … … … … … … … … … Mahatma Gandhi … … … … … … … … … …
« We must be the change we wish to see in the world »
« There is a sufficiency in the world for man's need but not for man's greed »
« We adopt the means of nonviolence because our end is a community at peace with itself » — ML King
I believe it will probably not work as everyone hopes it will. But, If you don't make enough money to pay taxes, that is not the government's fault, please get out there and work.
The government should not try to put harder penalties on letting jobs go overseas. The additional cost to have the jobs stay here will just be passed on to you and me. This will only make my little income less valuable.
dmgreenaz: your idea about a credit on points and fees to refinance is genius.
I would like to run with this idea. If you see a problem such as the mortgage crisis, you need to identify it and attack it. Refinancing is a great option but the fees do cause discouragement.
Your comment was the most intelligent. Please stop telling us reasons that this package won't work and think up ideas that will work. Please also think your thoughts through before you state them. Read up about economics, before you make suggestions that would be equally unproductive.
You also have to understand that this is political. If he tried to pass a law that was aimed at mortgages the lobbyist will be all over them. It would be a great idea but you will not see it go through as quickly as this package was.
I ask you individuals to take some time and evaluate your income. The most beneficial thing you can do for yourself is create a budget. You have no idea how much money goes to McDonalds after taxes (if you pay them).
Do you understand that if you make over $100,000 that you will pay up to 33% of that in taxes? People that make 17,000 get up to 4000 dollars back after paying No taxes. This does not encourage the people with money to invest in business. When you tax the rich to give to the poor, you are giving money to people who are not educated enough to use it.
If the government gives a credit to people for points and fees people will buy an even more expensive house that they can't possibly afford but they think they can refinance and be fine in the future. Dmgreenaz I still think your idea is genius because it actually addresses the problem and you aren't just telling your personal woes like most of the other people on this discussion.
Some common sense and education on the part of the poor can really go a long way.
It cost $0 dollars to get a library card. I beg you educate yourselves.
Pdf, thank you for being smart to, the only problem with china is that the average worker gets treated like crap. I will still tell you that they are happy to at least have a job. I go to a very international school and my roommate is from Shanghi and his family doesn't make very much but they are really happy that they have a job because a lot of others don't. In America we are ridiculously spoiled, be grateful for what you have.
Nspire, your stupid and just feel like saying something, it's not the bankers fault you bought a house you couldn't afford. Without bankers we would never be able to buy a house.