Earlier this week, Representative Vern Ehlers voted in support of an economic “stimulus” package that would give tax “rebates” to the majority of taxpayers in the US. While this might encourage some spending, the package fails to address deeper structural issues with the US economy.
On Tuesday, Grand Rapids area Congressional Representative Vern Ehlers voted in favor of an “economic stimulus” package sought by President George W. Bush and brought before the United States House of Representatives. The bill–which was supported by an overwhelming number of Representatives (385 to 35) following a compromise deal hammered out by the Republicans and Democrats–has a primary goal of granting cash “rebates” to taxpayers in order to spur economic growth.
Yesterday, Ehlers sent out an email newsletter to his constituents explaining why he supported the stimulus package. He said that the bill was designed to “provide short-term stimulus to the economy to counteract recent signs of a nationwide recession” by “…inject[ing] $146 billion into the economy primarily through tax rebate checks issued to individuals and families.” According to Ehlers, two-thirds of the money will go to pay for the rebates with the remaining going to “tax incentives intended to spur business investment.”
However, despite voting for the bill, Ehlers expressed some muted criticism of it, stating:
“Although I voted for this bill, I am deeply concerned about its effect on our nation’s debt. We must do more to reign in spending so that our children are not saddled with our debt.”
Unfortunately, Ehlers voted in support of a bill that he might not have entirely supported. Similarly, the Democrats cut a deal with the Bush administration in order to pass the “stimulus” package without raising questions about whether or not the “rebates” are really the best way to provide assistance to those facing economic difficulties. At the same time, the Democrats caved on the issue of providing increases in food stamp and unemployment benefits. As passed in the House, the stimulus package gives a relatively modest amount of money to consumers while ignoring structural problems in the US economy.
Two progressive think-tanks, the Center for American Progress and the Center on Budget and Policy Priorities have both criticized the stimulus plan and argued that a more effective plan could have been passed by focusing on low-income workers. The House of Representatives removed two provisions–an increase in food stamp and unemployment benefits–that would have been a more effective means of stimulating the economy according to the Center on Budget and Policy Priorities. In a statement on the passage of the bill, the Center said that those two measures would have spurred more spending while the tax cut approach favored by the Bush administration typically means money is saved–not spent–by the middle and upper income families that benefit from the cuts. The Center also criticized the package for limiting the size of the rebate given to low-income workers:
“The principal weakness of the new rebate design is that it would provide smaller rebates to low- and moderate-income working families than to families at higher income levels, despite the fact that rebates provided to low- and moderate-income families are the most effective as stimulus. It also may be noted that the proposal does not cover the 22 million mostly low-income households who do not file income tax returns. It is nearly impossibly to reach such households through a tax rebate, but millions of these households could have been reached through a temporary increase in food stamp benefits. The food stamp provision, however, was dropped from the stimulus package.”
The stimulus package passed in the House fails to address structural issues such as a weak labor market, budget deficits, trade deficits, and an unsustainable housing boom according to the Center for American Progress. As such, the Center recommends a progressive stimulus package. Their package contains a number of proposals that we won’t here Representative Ehlers or the federal government talking about. These include calling for Congress to develop a means to help homeowners refinance their homes, legislation aimed at preventing foreclosures, federal aid to municipalities to address declining tax bases, uniform rebates to all tax-paying families, an increase in food stamp benefits, increasing the federal share of Medicare, increasing unemployment insurance, helping low-income residents pay their energy bills, funding job training and development programs in so-called “green” industries, and increasing spending on making homes more energy efficient.
The proposals raised by the Center for American Progress raise important questions. What kind of economy do we want? Do we want one in which the most vulnerable are ignored? What are our fundamental economic values?