Bush And Congress Promise Economic Stimulus Package Within A Month
Washington Times:
President Bush and congressional leaders yesterday sought to reassure investors and stock market watchers by promising to craft an economic stimulus package within a month, before Congress recesses in mid-February for Presidents Day.
Mr. Bush, who met with congressional leaders at the White House, said he is “confident” that Congress can quickly pass an agreement to boost consumer spending and small-business investment. He said the fundamentals of the U.S. economy are strong.
House Speaker Nancy Pelosi, California Democrat, was not as certain about the economy’s prospects, but said she and other Democratic leaders feel an “urgency” to get something done.
“We hope our economy is strong, but we have to act as if it is in a downturn because that is how it’s being felt at the kitchen table,” Mrs. Pelosi said at the White House.
A major part of the roughly $150 billion stimulus package is expected to be tax rebates of as much as $800 for individuals and $1,600 for families to provide a jolt in consumer spending, in addition to tax-code changes that would hopefully free capital for businesses to retain employees and continue investing.
But the director of the Congressional Budget Office, Peter R. Orszag, told the Senate Finance Committee yesterday that no matter what the White House works out with Congress, rebate checks will not go out until May or June.
The White House gathering followed a meeting on Capitol Hill between Treasury Secretary Henry M. Paulson Jr. and congressional leaders of both parties, continuing bipartisan talks that began last week and included several phone calls during the long holiday weekend.
But deciding who gets a rebate check or tax cut and for how much remain the subjects of much back and forth around the bargaining table.
“There’s a lot of debate about who … should be entitled to the rebate,” said House Minority Leader John A. Boehner, Ohio Republican. “That conversation will continue.”
House Majority Leader Steny H. Hoyer, Maryland Democrat, said “we need to do something that’s simple, that everybody can understand, that’s fast and that’s focused … so that whatever we do in trying to get money into the hands of people, they spend it to spur the economy and to prevent a possible recession.”
Some Republicans, while in favor of tax-code changes to help businesses, are skeptical of the impact of any rebate checks.
Sen. Pete V. Domenici, New Mexico Republican, said the $145 billion stimulus package the White House and the Democrat-led Congress seem to agree upon is “too little, too late.”
“I think we should consider a larger plan, possibly as much as $300 billion,” said Mr. Domenici, who formerly ran the Budget Committee and who is not seeking re-election. “This would allow us to offer significant rebates to a broader range of Americans. … I do not believe $300 billion is overreaching.”
Rep. John Campbell, California Republican, said much of the current economic downturn was caused by an overexuberance of lending and by consumers taking on too much debt.
“I don’t think if you put $200 or $500 or $700 in someone’s hands that that’s going to cure all their fears. Their fears are related to, ‘Am I going to lose my job?’ ” said Mr. Campbell, one of several lawmakers who helped draft a set of proposals for tax-code changes to favor businesses, which was released yesterday by the Republican Study Committee, a group of more than 100 House Republican fiscal hawks.
The proposal recommends full, immediate expensing of assets; a reduction in the corporate tax rate, from 35 percent to 25 percent; elimination of the capital-gains tax on inflation; and reduction of the capital-gains rate, from 35 percent to 15 percent.
Congressional negotiators are backing off from partisan proposals that could stymie the stimulus package, including Republican plans to extend President Bush’s tax cuts that expire in 2010 and Democratic plans for government spending on road and bridge projects, said a top Democratic aide.
A faction of Senate Democrats still are pushing for spending programs but support is fading for such infrastructure projects, which likely would take months to start and longer to reap economic impact, the aide said.
Mrs. Pelosi has said she wants to put extra money into the hands of as many U.S. consumers as possible, a signal that she favors issuing rebate checks to low-income workers who do not pay income tax but pay FICA tax.
Rank-and-file Republicans balked at the payout to those who don’t pay income tax, but Mr. Paulson said the administration backed a “broad-based” plan that will reach a large number of Americans. He also stressed keeping the plan simple to avoid getting bogged down in congressional debates.
“I have been very encouraged by the way both parties have come together [in] bipartisan support for moving quickly to do something that will make a difference this year in our economy, that will be meaningful, that will be temporary and something that we can hopefully get done quickly,” he told reporters on Capitol Hill.
Be respectful of others and their opinions. Inflammatory remarks and inane leftist drivel will be deleted. It ain’t about free speech, remember you’re in a private domain. My website, my prerogative.
If you can't handle using your real email address, don't bother posting a comment.
“tax rebates of as much as $800 for individuals and $1,600 for families to provide a jolt in consumer spending, in addition to tax-code changes that would hopefully free capital for businesses to retain employees and continue investing.”
Bravo, I like it.
January 23rd, 2008 at 7:28 pmEconomic Malady – Stimulus Insufficient
The underlying problem with the economy is an extreme maldistribution of income between the working class and the capital owners. When a CEO can make 300 million dollars while an average worker’s wages haven’t even kept pace with inflation what results is a dysfunctional market economy starved for consumption spending. The average American has had to fuel his/her spending with debt obtained by borrowing on the equity within their home - that phantom equity has now evaporated.
In order to correct this out of balance condition there needs to be laws in place (similar to the anti-Trust legislation) that caps the annual income of all capital owners and their surrogates (CEOs, CFOs, etc.) at a specific federal percentage above that of the highest paid worker within their respective firm. Also, we need to eliminate labor arbitrage by canceling all Temporary Worker Visa programs (L-1, H1-B, etc.), and establish tax penalties for firms that expand their workforce above some threshold through outsourcing, or replacement hiring in foreign locations.
Essentially, FDR was accurate when he characterized the Great Depression as an out-of-balance Economic malady. Rural income prior to the Great Depression was significantly lower than urban income, now (overvalued home equity) as then there was unlimited amounts of overvalued phantom equity flowing into the stock market, the income differential between labor and capital while nowhere near the current astronomical level was still much higher than sustainable. There in lies the root cause of the out-of-balance condition that precipitated the Great Depression. Any system including the market economy that gets to far out balance does not function properly. Certain constraints need to exist to keep the market economy from slipping into a dysfunctional state. Balance is the essence of stability nothing short of this will guarantee permanence.
John Maynard Keynes –
If fiscal policy is used as a deliberate instrument for the more equal distribution of incomes its effects in increasing the propensity to consume is, of course, all the greater.
Aggregate consumption depends mainly on the amount of aggregate income.
Consumption – to repeat the obvious is the sole end and object of all economic activity.
We cannot, as a community, provide for future consumption by financial expediants [stocks, bonds, 2nd mortgages on home loans, etc] but only by current output.
Capital is not a self-subsistent entity existing apart from consumption.
Consumption is directly tied to the level of employment.
My Proposed Program
• 2 year 800 billion emergency Infrastructure Investment Jobs Creation Program (IIJCP) aimed at building new interstate highways, mass transit systems, schools, bridges, public hospitals, libraries, and assorted public buildings.
• Eliminate labor arbitrage by canceling all Temporary Worker Visa programs (L-1, H1-B, etc.), and establish tax penalties for firms that expand their workforce above some threshold through outsourcing, or replacement hiring in foreign locations.
• Taxation of corporate profits in the amount of 95% for firms that exceed a threshold level of jobs outsourced to a foreign country.
• Taxation at the rate of 80% on individual yearly income received from any corporation, not-for-profit organization, or any form of legal entity where the total income exceeds the U.S. average yearly median individual income by 200%.
• Fair trade agreements that ensure nations will offer decent wages, humane working conditions, and sound environmental policies.
• A nationalized health care system for all U.S. citizens.
• An effective federally funded tuition assistance program for U.S. citizens targeted at professions in demand.
• Repeal all legislation that inhibits the right’s of individuals to organize under labor unions regardless of position or any other currently disqualifying classification.
My Observations:
January 26th, 2008 at 6:05 am• An economy can only function when a large proportion of the populace is engaged in the economy thus able to purchase what is produced.
• If price is inelastic and labor remuneration static demand will fall due to reductions by industries in their capital base (the most important being labor).
• Firms forced to compete (those that are not oligopolies) in an economic environment where demand is declining will still compete on price but efficiency gains and operating cost reductions by nature have marginal declining utility whereby a point is reached when the firm’s factors of production (land, labor, or capital) must be slashed. These cuts in factors of production will have a multiplicative effect throughout an economy resulting in an ever building ‘wave’ of economic decline.
• It is important to keep in mind that an economy cannot continue to grow when long-term consumption continues to decline. This in turn ties directly to reductions in the factors of production to accommodate continual long-term reductions in consumption.
• When geographical barriers, constraints to the free flow of labor resources, underemployed resource utilization, similar knowledge distribution across all nation state’s, and nation state governmental inconsistency exists no global free market can exist and thereby at the nation state level no significant corresponding opportunity cost for engaging in one form of economic endeavor over another.