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What a Second Stimulus Should - and Shouldn't - Look Like
Recounting the findings of a new study by the Keystone Research Center, the Denver Business Journal reports that "the unemployment rate would approach 16 percent nationally -- more than 6 percentage points higher than the current jobless rate -- if not for the federal stimulus program." This comports with data released earlier by the Congressional Budget Office and with the opinions of both liberal and ultra-conservative economists.
Such consensus should end the debate about whether or not Congress should pass another stimulus bill. It should - the only debate should be over the shape of that stimulus bill, and even that shouldn't be up for debate, though, unfortunately, it most certainly is.
From both liberal and conservative economists - as well as from history - we know that direct government spending on things like infrastructure and education investment is a good way to prime the economy in the short term and the long term. So is spending on stuff like unemployment benefits and food stamps, which puts money into the hands of those who will spend it immediately on necessities. And, of course, we know from polls that spending on such priorities is far more politically/electorally popular than devoting more money to corporate tax cuts or to deficit reduction.
We also know from the Bush era - and from 20th century history in general - that tax cuts are far less effective at spurring economic development than direct spending. That's why this Washington Post story is so troubling:
Under mounting pressure to intensify his focus on the economy ahead of the midterm elections, President Obama will call for a $100 billion business tax credit this week...The business proposal - what one aide called a key part of a limited economic package - would increase and permanently extend research and development tax credits for businesses...
Sure, it's great that the president today is talking about spending $50 billion on infrastructure. As evidenced by this very diary, I obviously support such new spending. But when the paltry sum of $50 billion is put up against double that amount in corporate tax cuts, it seems like the administration's priorities are all screwed up. If the job-creating weakness of the first stimulus bill was it's willingness to devote roughly 40 percent of its funds to less-effective tax cuts and just 60 percent to employment-boosting spending, then a similar weakness will even more amplified in new stimulus proposals that, by the administration's initial figures, may end up devoting double to tax cuts what it devotes to infrastructure spending.
After all, there are two fundamental problems with the tax cuts being proposed: 1) In general, tax cuts have not proven to be a very good short- or long-term job creator or economic engine and 2) In specific, as Citizens for Tax Justice has long reported, the R&D tax credit has become something of a corporate boondoggle, especially in light of the far more effective direct government spending on R&D. Even the conservative Wall Street Journal has lambasted this particular tax credit as blatant corporate welfare, noting that, according to the Government Accountability Office, 70 percent of it goes not to small businesses in need, but to already-wealthy multinational firms with receipts of $1 billion or more. Think big drug companies, as just one example.
But maybe that's the unfortunate point. Maybe this is yet another example of the administration looking first at how a policy can satisfy Big Money, and then at the (alleged) residual benefits to average American workers - rather than looking at it in the opposite way. If that's the case, it's tragic - because the success of the first stimulus's spending gives the administration strong ammunition to put forward a far more progressive proposal, one that would be far more politically popular for Democrats in advance of the 2010 election.
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Show All"because the success of the first stimulus's spending gives the administration strong ammunition..." OMG! 911. The whole damn foot is blown clean off!
Although the propaganda ministers tell us that corporations and the rich will use money saved by tax cuts to create jobs, they really use the money they save in taxes to 1)speculate on commodities thereby contributing to price spikes and bubbles, and 2) to promote right wing agendas and candidates.
All the punditry in Washington says that a new stimulus is impossible and Krugman's column today notes that Obama has fallen into the political trap set for him by proposing too small and too ineffectively structured stimulus. It's hard to call Obama a victim though because what he is proposing as a second stimulus is more of the same, too small and too much given to business tax cuts which have a low multiplier effect. Obama is leading his party off the cliff, his faithful lemmings follow him to electoral doom. Once again we on the progressive left are crying in the wilderness. I have reached the conclusion that if there is a way out of this mess it will not come from the Democratic party. Or am i too pessimistic?
No, just realistic.
Sure, let's give 100 billion more in tax cuts to the Corporatocracy!!!
That way, since they're all now "persons," they can turn around and give that money right back to the members in Congress for bribes . . . oops, I mean for "lobbying."
Meanwhile, thousands of the the unemployed and the underemployed are wondering where their next meal is coming from.
OBAMA IS A DUD!!!!!!!
AND THE BEAT GOES ON . . .
The GOP is climate deniers, why? because it does not work well for corporate america. the corporations that have been allowed to pollute our air and water, food, homes, business without putting a cost to that pollution. Up to know the taxpayers have picked up the cost of containment and cleaning up their messes.
The millennials generation will be 90 million strong in 2018 and they will be taxpayers if they can find decent jobs. They will surely pay for the baby boomers social security just like the baby boomers paid for the greatest generation social security. Lies and misinformation.
The GOP was in power from 1994 to 2006 and they shut down gov't in 90's and proposing to that again when they take control. They ran this country into a ditch with the help of a lot of dems, but they are the lesser of two evisl and the choices we have. A lot of people have tried to change these choices to no avail.
DEMS NEED TO FRAME THESE MESSAGES 24/7. WHY ARE REPUBLICANS TAKING BACK CONTROL THIS YEAR. LIES AND MISINFORMATION IS WHAT THEY ARE SUCCESSFUL AT, NOTHING ELSE UNLESS YOU ARE A BANKSTER OR CORPORATE CEO AND UNLESS YOU WERE BORN WITH A SILVER SPOON.
No More Spending On Freeway/Paving Pork.
Infrastructure Spending for passenger and heavy rail Yes! No for wider and more freeways!
California, which has a 700 mile passenger rail plan, and many states have placed all their rail infrastructure development on hold because of lack of revenues due to the recession but the Fed could spur that rail infrastructure development and ten's of thousands of new jobs.
The petroleum centric freeway transportation system is a completely failed system that if we keep supporting will be the ruin of the biosphere and us all.
We must abandon supporting $100's of billions of more pork on paving new highways/freeways and roads across the land to support a failing transportation and agriculture system.
Rail is the only way to a smooth transition before it all collapses.
A "Mad Max/Road Warrior" world will be our future unless we wean ourselves off a petroleum based transportation system.
Absolutely!!
This "transportation" stimulus is totally lopsided when it comes to what we
really need to reduce the 70% of our oil used for transportation:
150,000 miles of road to 4,000 miles of Rail
It should be the other way around!
We cannot sustain the autocentric, energy wasting highway transit system as
the world runs out of oil and we face catastrophic climate change.
There are approximately 233,000 miles of rail in the US - why propose working
on only 4,000 miles of it??
As of 2006, U.S. freight railroads operated 140,490 route-miles (226,097 km) of standard gauge in the United States.
These are already existing tracks actively running freight trains.
We need to get these tracks and rail rights of way back into shape to provide
trolley service, light rail, commuter rail and intercity passenger rail as
well as revamped freight rail to get trucks off the highways.
NO MORE ROADS!!
"because the success of the first stimulus's spending"
What a hoot! Sirota is writing a comedy I guess.
Oh c'mon now. It put a hell of a lot of people to work for awhile. If it had been twice as big perhaps it would have got the economic ball rolling fast enough to continue. Putting people to work is the best way to get the economy rolling and to avoid Glen Beck type hysteria from creating chaos and evil.
Effectively 20 percent unemployment currently. Wage freezes and cuts. A peoples prosperity is in their purchasing power. The only natural way in a consumer economy to increase demand is for wages to rise with productivity. They haven't nor will they under the current regime or system.
The only "natural way" for wages to rise occurs when there is a shortage of workers for a particular skill. If the government would find jobs for at least half of the unemployed then these people would have the money and the security to spend, create demand, and further private job creation.
There it is "private job creation". You're a neo-liberal utopian supply-sider like Obama. Not one job will be created without demand. Government find jobs for people? Here's one for yeah everyone that wants job should have one as a right. A living wage job not some subsistence level wage. The people have had enough of paying the cost of the rich's poor management of the Earth's resources.
Dreams are ok as long as you recognize it as such. Otherwise you're merely an intelligent lunatic.
Full employment and a living wage are not rational goals?
Human beings are not a commodity to be bought and sold. Ever. Under any guise or subterfuge.
The few should never be deciding which "skills" are and are not "in demand," based solely on their desire to profiteer from the selling of the work of others while extorting it from them. "Supply and demand" when it comes to labor really means "suppress the person and extract the value from their work." It is indefensible morally, socially and politically.
Demand is not up to the 'few.' It is up to the people. The 'few' do have propaganda, but it is up to the people to decide.
The few control the capital, so yes, everything is up to the few.
The only stimulus known to the economic theories is the one practiced before globalization. Trade tarifs existed for a reason.
Once you understand the reason , you understand the bases for non-colonial economy
edweg
I have a better idea that writers and economists are too chicken shit to write about. Tax the corporate money stash that is not trickling down and credit it in progressive amounts from the bottom up. That is non inflationary and gets money in the hands of people who will spend it just to live. It is legal and doesn't require a gun. We know it will never happen though because the elites want to start a revolution so that they can declare martial law and become a dictatorship of wealth. The weakness of their theory is that great numbers of people will willingly die to get to them and return the favor.
Get off it David, President Zero is a brilliant, articulate constitutional scholar, who unfortunately uses his brain for a seat cushion! Do you really need to question where President Zero's loyalties really lie?
Mr. Sirota is once again seeing what he wants to see. Stimulus isn't economic recovery, it's more like a drug high. It may in the short run boost economic numbers. It also continues the malinvestments that caused the recession in the first place. See:
An Economy On Life Support Is Not Recovering
http://theinternationallibertarian.blogspot.com/2010/08/economy-on-life-support-is-not.html
Stimulus didn't help Japan in the '90s & isn't helping us now. Venezuela is a basket case because of govt spending. Same with Argentina.
On the other hand, free market Poland isn't even in a recession now. Looking back, the US got out of the recession of 1921 by cutting govt spending & taxes. This has a real history of working.
Screw you and your free market BS!
Hey, child, do I have to worry about dodging virtual spit balls too? Come back when you can post a grown up reply.
Is it just me? but I have noticed the qulity of articles on CD has gone south..
"What a Second Stimulus Should - and Shouldn't - Look Like"
It will not matter.