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Monday, February 9, 2009

A stimulating editorial from Robert Harding


There are some notable differences between the two economic stimulus packages proposed by both houses of Congress.
The House of Representatives, which already passed their version of the economic stimulus package. The House version would invest $550 billion into the economy plus provide $275 billion in tax cuts. The House version would create or save three to four million jobs.

But the Senate's version of the economic stimulus package is very different. Initially, the Senate Democrats increased the size of the package before realizing that they didn't have the votes to pass that package. In order to pass it, they needed a few Republicans to help them out. After negotiating with these Republicans, the Senate came up with a deal that fully or partially cut funding for several elements of the package.

The Senate's version also cut back on President Barack Obama's proposed middle class tax cut even though tax cuts are a main part of the Senate's package.

By comparison, one-third of the House package was made up of tax cuts (approximately $275 billion). The Senate version is said to include $350 billion in tax cuts, which means that in a package that costs approximately $780 billion, tax cuts are nearly half of the whole package.

So what does this all mean? It means that we are in for quite a week. The Senate has yet to vote on their package, but that vote should happen some time this week. It will be interesting to see how the states react, considering that $40 billion in funding set aside for states was slashed from the Senate's version of the stimulus package. Many states, including New York, would have benefited from that money. But now, much of it has been cut away.

The best plan is the House plan, but it was easier for the House to pass this bill. With such a solid majority, the House did not need (and did not receive) a single Republican vote. In all, 244 Democrats supported the bill. But the Senate does not have that luxury.

The Senate needs 60 votes. There are 56 Democrats and two Independents who caucus with the Democratic Party. That means they needed two votes. So instead of talking tough, they folded. They cut a stimulus package down to $780 billion and loaded it up with tax cuts for two votes. There might have been some deal-making that needed to be done, but the Senate Democrats went too far.

Economists say that we do need a stimulus package. And they also say the sooner, the better. We need a stimulus package. But we also need leaders who realize that we are in an economic crisis. This isn't time to take a hard-line stand solely based on politics. If a majority of economists say that we need a stimulus package, we should listen to those calls and implement a package that will be in the best interests of the American people.

(Robert Harding of The Albany Project blog)


Republican Economics

One of the best features of the original plan was aid to cash-strapped state governments, which would have provided a quick boost to the economy while preserving essential services. But the centrists insisted on a $40 billion cut in that spending.
So says Nobel Prize winning economist Paul Krugman The one part of the economic stimulus package that was understandable, money for state governments, was slashed by "centrist" Republicans in return for their votes to pass the package.

Here is the message I've been getting from Republican lawmakers. First, don't help states out, make them cut their budgets. Somehow losing state government jobs is good in the current economic climate. Claiming that firemen, policemen, teachers and corrections officers (both teachers and corrections officers are likely to lose jobs) is just fearmongering.

Second, tax cuts are what we need. Especially tax cuts for the wealthy and businesses. The benefits of these tax cuts will trickle down, like they did with the Bush tax cuts. And, by the way, we need to make the Bush tax cuts permanent. Nice thing about tax cuts for the wealthy - they work whether the economy is good or bad!

Third, don't give any breaks to those who need it the most - the poor. See, if you give them money they will only save it. We need to give it to people who will spend the money.

Unfortunately, if the economic stimulus doesn't work, Democrats are going to be blamed. If it works, I'm sure Republicans will figure out how to take credit for it.