Economic Stimulus Needs Rescuing

dogma n., 1 arrogant assertion of opinion …

The country needs your help. Little effort is required, but you must act now!

In his inaugural address, President Obama said he planned to end the “worn-out dogmas that for far too long have strangled our politics.” Nevertheless, at a time when our nation is swimming in a sea of economic woe, our new president is wrapping chains of Republican dogma around our nation’s neck. He does so because he’s ethical—he’s adhering to his own dogma.

Candidate and Author Obama vowed again and again to reach out to Republicans, to respect their viewpoint, and tailor policy to incorporate their wishes when those desires did not conflict with the common good. Keeping his promise, President Obama introduced an economic stimulus proposal containing $300 billion in tax cuts—tax relief he promised on the campaign trail—even though two-thirds of those cuts will sink our economy deeper. Next, the president powwowed with Republicans and, at their urging, removed some of the infrastructure spending from his proposal while increasing the tax cuts. Both changes are a mistake.

Both will be recessionary. Our country can no longer afford to have its policy shaped by people who formed their economic dogmas to fit their political and religious beliefs. We must have economic policy based on thoughtful adherence to evidence. Nobel laureate economist Paul Krugman says we need about $1 trillion in spending, none of which should be in the form of tax cuts for people who are unlikely to spend the money. The stimulus bill passed by the U.S. House of Representatives, with zero votes from Republicans, should succeed in creating or saving about 3.75 million jobs. Unfortunately, the U.S. economy is on pace to lose 10 million jobs during the next two years. That’s a net loss of 6.25 million jobs, yielding an unemployment rate of about 11.4%(1)

That rate reflects a depression, not a recession. Worse, we’re blowing our last opportunity to borrow deeply to reverse this decline. In my opinion, we must take exactly the right action now in order to avoid a decade-long depression.

If Congress fixes this bill—and hope still lies in the Senate—we could get a stimulus package that succeeds. E-mail your Senators. Ask them to change the bill. Here’s what we need:

= Remove $200 billion of tax cuts from the bill. Keep tax cuts for the poor and lower-middle-income earners. Yes, many of them don’t pay income tax. Doesn’t matter. This is not about socialism vs. capitalism. This is about avoiding the next great depression. This should prevent our nation from losing an additional 1.5 million jobs.

= Raise taxes on people who earn more than $200,000 a year, even small businesses. Taxes are levied against net income, not gross revenues. Despite recent rhetoric, no small business will lay off workers at the expense of earning greater profit.

= Increase infrastructure spending in the bill by $400 billion. This will yield another 4.8 million jobs.

With these changes, the stimulus bill should create or save 10 million jobs—the same number of jobs we are likely to lose on our current path. Two years down the road we’ll be in the same place we are today, with one significant change in landscape: Most of the homeowners currently or soon to be facing foreclosures will have refinanced or lost their homes. The supply of bank-owned properties should start to diminish. Then consumer confidence would return, which would truly stimulate economic growth again. By the way, even those foreclosures could be avoided with a carefully crafted interest rate subsidy policy.

We have about one week to change the course of Congress. Please, send links to this column to everyone you know. E-mail your Senators. Don’t let this week go without taking action.

Copyright 2009 by Todd Lederman. Feel free to copy and use this information, but please give me credit for authorship.

1. Bendull, Bruce F. (2009). Historical Labor Force/Unemployment Data for
UNITED STATES. Research and Analysis Unit, Indiana Dept. of Workforce Development. Retrieved 1/31/2009 from http://www.nidataplus.com/lfeus1.htm