What's the best way to jump start the economy? That is, how to best fashion a stimulus package that's going to cost taxpayers upwards of $1 trillion at the rate Congress is going?
Let me share some data and two points of view, one establishment, one populist.
First, let's hear from Mark Zandi, chief economist for Moody's economics..com. His testimony before Congress last month included this assessment of the "bang for buck" of assorted elements of the stimulus package.
Spending IncreasesTemporary Increase in Food Stamps $1.73
Extending Unemployment Insurance Benefits $1.63
Increased Infrastructure Spending $1.59
General Aid to State Governments $1.38
Temporary Tax CutsPayroll Tax Holiday $1.28
Across the Board Tax Cut $1.03
Accelerated Depreciation $0.25
Permanent Tax CutsExtend Alternative Minimum Tax Patch $0.49
Make Dividend and Capital Gains Tax Cuts Permanent $0.38
Make Bush Income Tax Cuts Permanent $0.31
Cut in Corporate Tax Rate $0.30
Other Tax CutsRefundable Lump-Sum Tax Rebate $1.22
Nonrefundable Lump-Sum Tax Rebate $1.01
In a nutshell, the best stimulus involves giving money to the down-and-out. Cutting taxes for corporations and the rich provides much less oomph.
"The most efficacious spending includes extending unemployment insurance benefits, expanding the food stamp program, and increasing aid to hard-pressed state and local governments. Increasing infrastructure spending would also greatly boost the economy, particularly in the current downturn, as the economy's problems are expected to last for an extended period and most of the money will be spent on hiring workers and on materials and equipment produced domestically."
Elsewhere in his testimony, he said housing prices have dropped 20 percent and stock prices 40 percent over the past year. Ouch.
OK, on to the populist perspective and a Democracy Now! interview with David Cay Johnston, the retired Pulitzer Prize-winning tax reporter from the New York Times who lives in Rochester and spends part of his time teaching at Syracuse University when he's not writing award-winning books.
He's on board with the concept of targeting money for infrastructure and the unemployed. The most startling part of the interview was this:
"If you add up all of the bailouts that the Bush administration did in the fall, the investments, the spending and the guarantees, it’s over $8 trillion. How much money is that? It is more than all of the income taxes paid by all Americans for the entire eight years of the Bush administration."
It's also more than eight times the size of the stimulus package now before Congress.
The cost of cleaning up the current mess will be a huge drag on the economy in the near term. But we are, at last, at a turning point; we have a chance to end the socialism for the rich that put us into this hole.
How? By, in effect, reverse engineering the debacle. Rewriting tax laws and financial regulations has been the principal vehicle for turning government into a subsidy system for the deep-pocketed and well motivated. It can work in reverse as well.
President-elect Obama has offered some interesting ideas to make the tax code more fair — but by and large, his proposals amount to tinkering around the edges, not the kind of serious restructuring previous presidents, most notably Reagan, undertook.
Here's another way to go. We can start by eliminating some of the most spectacular tax giveaways and move on to doable, efficient steps toward shoring up our biggest asset — not stocks, bonds, or houses, but people. Best of all, much of this won't cost a penny; in fact, it will raise billions for the big tasks ahead.
He goes on to offer a 14-point plan that's a thought-provoking read.