The Stimulus: It Only Gets Worse

Paul Krugman writes:

"What do you call someone who eliminates hundreds of thousands of American jobs, deprives millions of adequate health care and nutrition, undermines schools, but offers a $15,000 bonus to affluent people who flip their houses?

A proud centrist. For that is what the senators who ended up calling the tune on the stimulus bill just accomplished."

Bi-Partisanship or "post-partisanship" which seems to be the en vogue term in DC these days, is continuing it's Sherman-esque march to destroy the American economy. Sen. Ben Nelson (D-NE) and Sen. Susan Collins (R-ME) fashioned a "compromise" stimulus by reducing the $900 billion price tag to somewhere in the vicinity of $800 billion. These centrists, as they so proudly proclaim themselves, fancy themselves the deal makers that will usher America out of this deep recession. Unfortunately, as Krugman and numerous other economists point out, nothing could be further from the truth. Nelson and Collins wielded their pens like sabres slashing away at important provisions in the stimulus that would've helped to ease the pain on those most in need. Included in their cuts: $40 billion in aid to state and local governments and $16 billion allocated for school construction. Instead they stuck in a provision aimed towards reducing housing inventory that will award a $15,000 tax credit for new home buyers. Does this make sense? Well, think about it. The economy sucks right now. Most people are guarding their means and adapting to a more frugal lifestyle. The purchase of a new home is not likely to be high on the average American consumer's list of priorities. This will likely only help those that could afford to buy a home in such economically calamitous times, i.e. rich people. The distinguished senators from Nebraska and Maine also saw it fit to add a patch for the Alternative Minimum Tax (AMT). The AMT was originally levied in order to ensure that the very wealthiest of citizens would pay their fair share of taxes. This patch will instead place more money in the hands of the very rich. Not only is this incredibly regressive and morally repugnant, but it will have egregious consequences for the economy. Rich people are rich because they have lots of money in the bank. Therefore, this money that has been so generously awarded to their coffers by the paragons of Senate Centrism will, most likely, go into savings. What we need now is for people to spend money. Spending acts as stimulus. Poor people, unlike the rich, have immediate needs. If the the government puts money in their hands, they are likely to spend it...immediately. What happens then? I'll tell you! The mass spending by the working and middle class results in a renewed flow of cash into the American economy. American companies then seek to hire new employees in order to meet the demand. Essentially, giving money to ordinary Americans results in economic stimulus, which in turn results in putting Americans back to work. Neat, huh!?!

Well, Senators Nelson and Collins, have other intentions. In fact, if these cuts remain, the effects will be disastrous. Many state governments have already emptied their trusts dedicated to unemployment benefits. They are in grievous need of additional funds. The $40 billion that was originally in the stimulus, was meant to fill this gap. Now (once again, if these cuts remain), with more people than ever needing unemployment benefits, the states will have insufficient funds to meet the demand. Moreover, states will have to lay off hundreds of thousands of workers and reduce services. What do you think about that? Does it sound like a good idea? How about eliminating $16 billion for school construction? With a constantly growing population, and our schools in disrepair, wouldn't it be smart to build more, state-of-the-art schools? Not only would this result in quality schools for American children, but it would put countless Americans to work building these schools.

In closing, I know I'm beginning to sound like a broken record on this, but the situation is very dire. So-called "moderate" and "centrist" senators are given free reign to redistribute the benefits from the stimulus from the bottom to the top. As Paul Krugman laments:

"All in all, the centrists’ insistence on comforting the comfortable while afflicting the afflicted will, if reflected in the final bill, lead to substantially lower employment and substantially more suffering."

Please God, don't let this happen.

Photo courtesy of Flickr user Don lannone, November, 25 2008