Do We Need Another Stimulus Package?
Back in February 2009, Congress passed, and President Obama signed in law, the American Recovery and Reinvestment Act of 2009. The goals of the Act were to create new jobs and spur new economic activity by spending $787 billion.
More than 17 months have passed, during which the government has run a deficit of more than $2 trillion, yet the economy has lost more than 2.6 million jobs, regulators have closed more than 200 banks, and more than a million of homeowners have lost their houses to foreclosure. While GDP may be growing in response to the massive increase in deficit government spending, clearly the economy has not healed, and there are calls from the left for yet more stimulus spending, including $34 billion to yet again extend unemployment benefits from a maximum of 99 weeks to 126 weeks. That is almost two and a half years of unemployment benefits—enough to make a French socialist blush.
And yet, according to figures at www.recovery.gov, less than half of the stimulus money authorized by the 2009 Act has been spent—only $425 billion out of $862 billion. (Earlier this year, the CBO estimated that the true cost of the Act had risen by $75 billion from the initial estimate of $787 billion; no telling how large will be the final tab!). The remaining $437 billion has been held back—for what? Who knows? While we can debate the merits of extending unemployment benefits, certainly we can agree that it should be funded out of the unspent 2009 money rather than adding another $30 billion to this year’s already staggering deficit.
As for the rest of the $400 billion in unspent stimulus money, how about returning it to the taxpayers? In a 2007 article, Obama economist Christina Romer and her husband David estimate that the economy will grow by $3 for each $1 in tax cuts. In other words, by cutting taxes with the $400 billion, we can boost GDP by $1.2 trillion. Certainly we don’t want to accomplish this by rewarding the Wall Street oligarchs, so let’s return this money to taxpayers through the payroll tax by declaring a payroll tax holiday for the rest of 2010. This will have the impact of immediately boosting the working person’s take-home wages by 17.6%.
Now that would be change I could believe in!
