Economics For the People
George W. Bush wants to give a big gift to the rich. One that will cost the country $600 billion over 10 years, even as we are preparing to pour billions into the war against Iraq, and social programs that serve the poor and working people are being cut right and left. It should come as no surprise.
Even so, eyebrows were raised by the "economic stimulus" proposal that Bush unveiled Jan. 7 during a speech to the Economic Club in Chicago. The Wall Street Journal called it "audacious." Labor, community and anti-war groups are calling it unethical, unworkable ... and typical.
But a wide-ranging coalition of organizations across the spectrum snapped into place almost immediately after the announcement by releasing various alternative stimulus plans. A multi-faceted campaign to defeat Bush's proposal and promote the tenets of the alternate plans is quickly being cemented.
The House Democrats have already offered their own stimulus plan, which labor and progressive groups agree is worlds better than Bush's. But most say the Dems' plan could do more to adequately address escalating economic problems, assuage state deficits and protect the health and security of poor and working people.
The AFL-CIO, the Economic Policy Institute (EPI) and ACORN (Association of Community Organizations for Reform Now) are just a few of the groups that have published their own plans. Citizen lobbying drives that are targeting Democrats and possible swing Republican voters in Congress are already underway, and various groups say public rallies and other actions are also in the works. The Campaign for America's Future said its action Web site (theretheygoagain.com) got more than 5,000 people to send letters directly to their Congressmen, becoming the group's most popular campaign just two days after being launched.
"There will be accountability sessions, protests and rallies around the country," said Roger Hicky, co-director of the Campaign for America's Future. "Especially in areas where Democrats might be tempted to vote with the president or where moderate Republicans might be convinced to vote against it."
Hicky noted that the coalition of groups working against the plan includes unions, community organizations and anti-war groups.
"We have a long history of bringing together labor, environmentalists, senior citizens," he said. "And groups educating about the war in Iraq can also make the point that any war will worsen the economy and raise oil prices, meaning more economic dislocation. It's another reason not to go to war."
The opposition groups and various pundits are united in their criticism of Bush's plan for both its focus on benefiting the wealthy and its overall inefficiency.
Bush's plan does include some aspects that would benefit average people, like an increased child tax credit, an end to the "marriage tax" and extended unemployment benefits. Hickey points out, however, that none of these measures helps the many poor people who pay no taxes, unemployed people, or those who earn a living in the informal economy.
Over half of Bush's plan revolves around cutting taxes on stock dividends. While Bush has tried to portray this as a policy that would affect most of the population and pump vast amounts of money into the economy, the reality is that only a small elite would reap any significant benefit from the cut. A large percent of the population doesn't own any stock at all, and even those who do have small enough amounts that the dividends cut would provide a benefit of no more than a few hundred dollars. Stock held in nontaxable 401(k)s and other retirement plans, the most common form of holdings for working people, would not be affected at all.
"I don't own stock and I know most of my neighbors don't," said Sonia Merchant-Jones, an ACORN member in Baltimore who plans to visit D.C. to lobby against Bush's plan. "I wish we had money to invest in stock, but we're just busy making ends meet."
According to Citizens for Tax Justice, the wealthiest 1 percent of taxpayers, who make over $356,000 a year, will get 50 percent of the benefit of eliminating the dividends tax.
Merchant-Jones, who has been on disability since exposure to dust and chemicals in the course of her job inspecting public housing high-rises exacerbated her asthma to dangerous levels, said she would be helped by the child tax credit and the extended unemployment benefits. But she sees those as only "crumbs" compared to the "whole loaf" that Bush is giving the wealthy.
"The president never really helps poor people," she said. "He just gives something but takes something else away."
Not only is Bush's favoritism toward the rich morally questionable, it is not likely to boost the economy much. Despite claims that the proposal would create jobs through consumer demand, the fact is the wealthiest portion of society is the least likely to actually spend this extra income anytime soon. They will reinvest most of it, but if working class and middle-class people were given a break, they would immediately return most of the benefit to the economy by purchasing needed goods and services and modest luxuries.
"The wealthy are not likely to change their buying habits in response to a tax cut, but the rest of us tend to spend whatever tax cuts we receive, thus stimulating the economy," says a statement from the Campaign for America's Future.
And the positive effects Bush's plan would have won't even kick in until after it is no longer direly needed, since 90 percent of the elimination of tax dividends won't occur until after 2003, according to the Center on Budget and Policy Priorities.
Bush's plan could also be devastating for already strapped state budgets, eliminating $4 billion or more from state tax revenues but replacing that amount with only $3.6 billion which is specifically earmarked for a new program called Personal Re-employment Accounts.
States are already being called on by federal mandates to increase spending on Medicaid, homeland security and various social programs, so essentially Bush's plan would force them to try to do more than ever with fewer resources. What falls through the cracks in this impossible equation will be health care and education for the working and poor.
Most of the alternative plans take all these factors into account, calling for stimulus packages that focus on the working and poor, have an immediate effect, and address state budget deficits. The Campaign for America's Future developed five talking points based on the alternative plan proposed by EPI director Dr. Lawrence Mishel. They say a workable plan must be effective at generating jobs and growth. It must be fiscally responsible and it must not worsen deficits in the long run. It should take effect immediately. It should also be fair -- "not just favoring the rich or making the tax code less progressive" -- and it should "target unmet needs."
The EPI plan would use temporary tax cuts and spending measures to rapidly create new jobs and income by generating more consumers.
Its two main elements are a one-time $110 billion expenditure on grants to states to be used for health, education, school repair and other services along with an extension of federal unemployment benefits; and a one-time wage bonus worth $65 billion and benefiting 149 million workers. The bonus would rebate 3.5 percent of a worker's first $15,000 in wages, meaning someone earning $15,000 a year would get a $525 rebate.
"Any stimulus involving permanent increases or tax cuts will adversely affect the government's future fiscal position," writes Mishel, whose plan has been widely lauded and credited with influencing the Democrats' proposal. "A stimulus package that is both effective and fiscally prudent must consist of new but temporary spending, coupled with an immediate but temporary tax cut in the form of a wage bonus. Such measures will boost demand for goods and services, generating more customers and leading businesses to invest and increase employment."
The ACORN plan calls for raising the minimum wage and instituting tax cuts for regular working people, while also addressing affordable housing and protection from foreclosures, expanding Medicaid for unemployed workers, and affordable energy. Among other things, it calls for Bush to release $300 million in emergency funding for the Low Income Home Assistance Energy Program (LIHEAP), which the president has so far refused to do despite rising fuel costs and cold weather.
The AFL-CIO plan also includes raising the minimum wage, developing payroll tax rebates that will benefit all workers, and giving money directly to states to help them meet deficits and federal mandates. The AFL-CIO is also calling for more extension in unemployment benefits than Bush has offered. It notes that his 13-week extension only applies to people currently becoming unemployed; they want it to be applied retroactively to already unemployed people.
"We feel there are two powers in the economy," said Kathy Roeder, spokesperson for the AFL-CIO. "The state deficits and a lack of demand in the economy. Our agenda for what economic stimulus should look like is a lot different than the president's. We would like to see a plan where money is actually put into the hands of workers who will spend it."
Kari Lydersen is a freelance journalist based in Chicago.