The morons are coming out of the woodwork on Capitol Hill. Most of them…not all of them…are GOPers, but all of them must have failed Economics 101. Here is what they would have learned in that class had they been paying attention. In an economic downturn like this one, you need to make jobs fast. The one party that can make the jobs is the government. Thus, the stimulus bill should be a jobs bill. It should build infrastructure and it should support other programs that keep people working.
Sen. Ben Nelson (D-NE) says we are wasting a proposed $100 million that would study the cost effectiveness of medical treatments. Even though the proposal is ready to go, so people can be hired quickly, it will directly employ a number of researchers (i.e. young PHDs and graduate students who would otherwise be out of work), computer technicians and clerks, and it would require buying a lot of stuff…like computers. (And lets face it, we could save a lot of money if we understood the cost effectiveness of medical treatments). Nelson, apparently, thinks only blue collar jobs are stimulative.
Worse, a completely clueless Freshman GOPer , Mike Johanns (also of Nebraska) tells us “This is not a stimulus bill, it’s a spending bill.” DUH!
Worst perhaps is a proposal by John McCaine that would provide a tax credit for buying a new car and a $15,000 tax credit for buying a house. Of course people who don’t have jobs cannot, or should not, buy new cars. The car money will go to people who would have bought a car anyway. This might help absorb housing inventory, but it won’t build new houses until the entire economy is stable.
McCaine’s proposal is in line with the GOP mantra that tax cuts are the way to stimulate the economy. The historical record, which has proven this does not work, not withstanding. Gee, there is even data to prove the point. The Economic Policy Institute wrote in August 2007, “Contrary to supply-side arguments, both investment and employment grew considerably faster in the 1990s, when tax increases raised revenue, compared to the 2000s, when the tax cuts lowered revenue. Investment grew 35% more quickly in the 1990s, and employment grew 6% faster. Of course, there are always many different factors driving investment and employment, none of which are controlled for in this analysis. But the data clearly refute the simplistic notion that the tax cuts of the 2000s boosted investment or job growth.”
More to the point, a recent study of the Obama stimulus bill by Mark Zandi at Moody’s Economy.com shows that the best case scenario for a tax rebate is that it might (depending on how it is structured) return $1.28 for every dollar spent. The best case scenario for a permanent tax reduction is that it would return $.49 for every dollar spent. (Yes, that’s 49 cents.) At the same time, an increase in unemployment benefits would return $1.63 for every dollar spent and infrastructure spending would return $1.59 for every dollar spent. No data on spending for medical research but its got to be worth more than negative 51 cents per dollar.
So there is plenty of evidence, beyond common sense and the historical record, that tells us that tax breaks do not work. A stimulus package means direct spending for things that put people to work. Voodoo economics ain’t in it.
It should not surprise all of us that John McCaine and John Boner don’t get these basic economic facts. Washington is not a fact based environment. Bullshit strides powerfully through the halls of Congress.
I suggested here some time ago that we should cut all tax breaks out of the stimulus bill. The focus should be on shoring up the social network (extending medical and unemployment benefits) and getting people to work (infrastructure and research spending.) Lets stride through the bullshit and get this done.