Months before the general election last year it was clear that a major fiscal boost would be needed to energize the national economy. Members of Congress understood that a major stimulus bill would be need to be passed in the first weeks of 2009. However no one last September could have predicted the economy would suffer such a collapse so quickly. The stimulus bill that was discussed last fall took on an urgency following the election, and the economic implosion. Now an $825 billion bill is working its way through the Congressional bill-making process. And it deserves our attention, and support. But it must be the right type of bill that will do the most good for the country’s needs at this time.
While there are many positive parts to the stimulus measure that will be required for economic gain, there is a portion of the plan that seems to make no sense to me. That is the portion concerning tax cuts, some $275 billion worth of them, that are not needed. While tax cuts are sexy sounding, and great for politicians to talk about with constituents, the facts do not seem to warrant them at this time.
My suspicion is that a large percentage of fearful citizens who have been battered by the economy will take any tax cut and put it into savings. That is not the way to spur the economy, and therefore the cuts will make good politics, but poor policy. At a time when consumer spending is decreasing by $400 billion per year it is essential that we work to kick start the purchasing of goods and services rather than save money.
It is my belief that government spending on ‘shovel ready’ projects, and long term infrastructure needs such as green technologies, would do much more to rescue the economy than tax cuts. I think it more important to put as much federal money into the portions of this bill that will do quick positive things, than in politically expedient tax cuts. It should also be noted that many economists with long resumes also understand the benefits of stimulus spending vs. tax cutting fever.
As the bill stands now roughly 40% of the stimulus measure goes to tax cuts, and I think that is a wrong policy decision, especially given the size of the deficit. While I agree that deficit spending should not be a deterrent to making sure that the correct amount of stimulus is provided to do the work required, I still think the money should be used intelligently, and applied where it will produce the biggest bang.
Finally, I think that many Americans understand that this is a time to accept a responsible role in solving the national economic problem. If that means not having a tax cut to insure that our long-term economic foundation is more stable, then that is what needs to happen.
I suspect James and I are like many other Americans. We now own our home, and as a result of modest living have no debts other than a car loan. Like every other American that is invested we took some hits over the past months. If you hear the tax cutters talk we would be the ones to benefit from the stimulus bill. But we do not need a tax cut. We know that things will get better if all the citizens work together for the larger goals of putting stimulus funding where it will do the most good. And I hope that our elected officials know that we are supportive of them if they can find the political courage to undo, or limit, the tax cuts in the stimulus bill.