All this hoopla over the bipartisan stimulus package is almost comical were it not so sad.
President Bush hailed "the kind of cooperation that some predicted was not possible here in Washington." House Speaker Nancy Pelosi (D-Calif.) used the words "bipartisan" and "bipartisanship" 10 times in a brief appearance. "Many Americans believe that Washington is broken," said House Minority Leader John A. Boehner (R-Ohio). "But I think this agreement, and I hope that this agreement, will show the American people that we can fix it."
Print that $150 billion quickly because I can hardly wait to get my hands on my $600. Certainly, this will help millions of people temporarily who have been struggling to make ends meet day in and day out for years. For those in or near poverty, and others living paycheck to paycheck, this money is guaranteed to be spent, and hopefully spent wisely. Because it is a one shot deal.
And while the politicians are all gloating and patting each other on the back for their bipartisan success, I sincerely hope they are planning ahead for the day when the honeymoon is over. Once the money is spent, and the lucky retailers on the receiving end of this windfall have tallied up their profits, I have a fear we'll quickly return to face the music of a dismal economy.
Few economists thought the stimulus plan alone would be adequate to keep the economy clear of a recession. Yet many portrayed the package as a significant psychological boost for anxious markets around the world, a sign that the Washington overseers of the American economy are seriously engaged in finding a fix.
“It is a much needed and very constructive step,” said Lawrence H. Summers, the Treasury secretary in the Clinton administration who has recently called for specific and temporary tax cuts. “It will provide some confidence. But policy-making will need to be on standby, because more may be needed.”
Indeed, this is nothing more than a "psychological boost" and more is definitely needed. And what is most irksome is how the Democrats caved in to the misguided notions of the Bush Administration yet again, and minority groups are most likely to be battered hardest should the recession intensify.
Democrats had sought the extension of unemployment benefits and an increase in food stamps. Research shows these measures deliver the largest increases in spending, because poor people are prone to buy what they need when given the chance. Wealthy people, by contrast, tend to save more when taxes are cut.
The Bush administration insisted on rebates alone, and House Democrats relented in exchange for adding payments to people who do not pay income taxes.
“They gave up pieces of the package that were more effective,” said Jared Bernstein, senior economist at the labor-oriented Economic Policy Institute in Washington, who blamed the Bush administration for blocking the expansion of benefits. “It’s a political choice, and a bad one. It’s an ideology that says, ‘I can get a lot more credit for tax cuts than I can for expanding unemployment insurance.’ ”
Unemployment among blacks and Hispanics has been rising at triple the rate for whites, while the time it takes for people to find new jobs has been lengthening, according to government data. Some experts argue that by failing to expand unemployment benefits, the plan leaves minority groups most vulnerable to a recession.
Paul Krugman's op-ed piece in the New York Times today echoes these concerns.
Specifically, the Democrats appear to have buckled in the face of the Bush administration’s ideological rigidity, dropping demands for provisions that would have helped those most in need. And those happen to be the same provisions that might actually have made the stimulus plan effective.
That’s why many of the stimulus proposals we were hearing just a few days ago focused in the first place on expanding programs that specifically help people who have fallen on hard times, especially unemployment insurance and food stamps. And these were the stimulus ideas that received the highest grades in a recent analysis by the nonpartisan Congressional Budget Office.
There was also some talk among Democrats about providing temporary aid to state and local governments, whose finances are being pummeled by the weakening economy. Like help for the unemployed, this would have done double duty, averting hardship and heading off spending cuts that could worsen the downturn.
But the Bush administration has apparently succeeded in killing all of these ideas, in favor of a plan that mainly gives money to those least likely to spend it.
In any event, let's not get too excited. It appears unlikely these funds will be in the hands of consumers before June due to the IRS being unable to begin processing these payments until the bulk of tax filings for 2007 have been completed -- usually at the end of May.
Speaking only for myself, I'm not sure what I will do with my $600 but the odds are it will not be spent at Wal-Mart, Target or Circuit City, nor is it likely to be spent at my local supermarket unless my current unemployment status is extended into the summer. Although I am jobless, I am still among the lucky ones whose receipt of these funds is unlikely to stimulate the economy. In fact, I think I might simply tack it on to that month's mortgage payment. A step closer to having a mortgage-free life is my own personal definition of security.