Stop Bush's Stimulus Package; It's a Give-Away to the Wealthiest

AFL-CIO's 5 Keys to a Stimulus Plan to Help Working Families
By Mike Hall
AFL-CIO blog


Unemployment is climbing. The stock market is dropping. The housing boom is bust. Corporate earnings are tanking. The nation's economy is in the worst shape it's been in years. Maybe even headed toward recession. Working families are worried.

[Last week] the Bush administration proposed a growth package of as much as $150 billion, which insiders familiar with the details say may include $800 tax rebates for individuals and $1,600 for households, along with business incentives. Although it is 'encouraging' that President Bush recognizes the need to act quickly to stimulate the economy, Bush focuses too much emphasis on tax cuts-both business and personal, according to AFL-CIO President John Sweeney. Bush's plan does not address crucial problems facing working families or target tax benefits to those families who need them the most and will spend them the fastest.

In a letter (PDF) to Senate Majority Leader Harry Reid (D- Nev.) and House Speaker Nancy Pelosi (D-Calif.), Sweeney wrote:
In particular, we are concerned that the President's income tax cut proposal would not be sufficiently stimulative because it fails to target lower-income and middle-income households who, as the Congressional Budget Office (CBO) wrote last week, are likely to spend a larger share of any tax benefit they receive.
Today, the AFL-CIO outlined several proposals to develop a short-term stimulus package that 'offers the biggest bang for the buck' and began to address the underlying causes of today's economic anxiety.

In addition, with many state tax codes linked directly to federal tax rates, Sweeney warns the business tax cuts could lead to a reduction in state revenues, resulting in economically depressing budget cuts and tax increases by state governments.

Noting that compromise will be needed to quickly enact a stimulus package, Sweeney urges Reid and Pelosi to 'insist on legislative measures' that will deliver the biggest boost to the economy and protect state and local budgets.

The five points the leaders are urged to include are:

  • Extension of unemployment benefits.

  • Increased food stamp benefits.

  • Tax rebates targeted to middle-income and lower- income taxpayers.

  • Fiscal relief for state and local governments to avoid the economically depressing effect of tax increases and budget cuts.

  • Acceleration of ready-to-go public investment in school renovations and bridge repair.


For the long term, Congress also must address the deep and serious underlying causes of today's economic woes. Says Sweeney:
While it is appropriate for Congress to focus on measures that have an immediate economic impact as it crafts a short-term stimulus package, this is no excuse to put our heads in the sand and do nothing about the underlying longer-term problems afflicting our economy.
Wage stagnation is at the heart of the economic problems facing today's ordinary working families.
Wage stagnation, which began in the 1970s, has led to longer working hours, higher consumer debt, and increasing reliance on home equities. But today home values are plummeting, home foreclosures are on the rise, consumer debt is reaching unsustainable levels, and prices for energy, health care, and education are soaring out of reach for many working families.
Sweeney's letter points to several solutions to solving the wage stagnation, including:

  • Ensuring transparency and effective regulation of our housing and financial markets.

  • Reactivating the historically successful fiscal and monetary policies that place a higher priority on full employment.

  • Fixing our flawed trade policies.

  • Investing in the high-paying green jobs of the future.

  • Fixing our broken labor laws so that workers who want to form a union can bargain with their employers for better wages and benefits.

  • Ensuring affordable health care and retirement security.


*****


MoveOn Calls on Congress to Stop Bush’s Skewed Stimulus Plan
By Noah, Eli, Wes, Justin, and the MoveOn.org Political Action Team


Congress and the President are racing to pass a stimulus package. Here's the problem:

The President's plan—tax breaks for corporations and rebate checks for the well-off—isn't just morally wrong. It's based on discredited "trickle down" theories and it won't work.

But there's tremendous pressure on Democrats to accept the President's priorities just to get something passed. Negotiations are happening right now, and Congress needs to hear from you right away!

We need to demand a progressive stimulus package—one that puts money into the hands of people who are feeling the squeeze (who, incidentally, will spend it fastest). One that funds public infrastructure projects that will create new jobs, make our economy more competitive, and reduce our dependence on oil. One that will actually solve the problem.

Can you sign our petition to Congress? Click here to add your name.

The petition reads: "Congress must quickly pass a stimulus package that helps those who need it the most and will spend it the fastest. And it should include public investments that will create jobs and move us toward a 21st century, clean energy economy."

A leading economist at NYU says "We're facing the risk of a systemic financial crisis." The mortgage, credit card, and auto loan industries are all in trouble. The stock market is tanking as we speak. On top of all that, we're hemorrhaging $2 billion a week in Iraq.

The "Iraq Recession" is here.

Yet Bush's proposal is just another kind of trickle-down economics. His plan gives little or no help to people who make less than $40,000 a year, and families of four making less than $24,950 would get nothing—even though those are the very folks who would spend a little extra cash in their pockets.
According to a top economic think tank, the Republican plan would do nothing to help about 65 million Americans. "This approach fails on two counts. It omits or partly omits those who need the help. And it omits the tens of millions of people who are living paycheck to paycheck and who would be most likely to quickly spend every dollar they can get."

Bush's own Federal Reserve Chairman Ben Bernanke testified before Congress that "putting money into the hands of households and firms that would spend it in the near term" would be more effective than other short-term fixes or tax rebates for the wealthy.

We need to get help into the hands of those who need it. That means making sure tax rebates go to working people, not millionaires, extending unemployment benefits, sending money to the states so they don't have to cut back programs for average people, and fully funding energy assistance programs for the low-income families struggling to heat their homes as oil prices rise.

And, with skyrocketing oil prices driving the recession, we need public infrastructure investments that create jobs in the short-term, and move us toward a 21st century, clean energy economy in the long-term. We should invest in energy efficiency, mass transit, and a Clean Energy Corps, putting hundreds of thousands of people to work rebuilding our economy.

And of course, we need to end the war that has already cost us $1 trillion.

This economic stimulus package will cost about $150 billion. Just think what we could do if all that money was invested in big, smart, sustainable ways. Or we could just try the same old, failed, trickle-down economics.

Congress is moving fast, and will make a decision as early as this week about what the plan will include. Click here to add your name to our emergency petition.

*****


Bush’s Stimulus Plan Misses the Target
By Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, and Ali Frick
The Progress Report


This past weekend, as most Americans celebrated the legacy of Dr. Martin Luther King, Jr., markets all across the world were experiencing precipitous declines. The fears of a recession "roiled markets from Mumbai to Frankfurt on Monday, puncturing the hopes of many investors that Europe and Asia would be able to sidestep an American downturn." Witnessing the global markets free fall, Federal Reserve Chairman Ben Bernanke took a sudden and surprising action yesterday morning, announcing the single deepest cut in the Fed's main interest-rate target in more than two decades. "The unexpected decision came after a rare, hastily called policy meeting by videoconference on Monday evening, and it reduced the Fed's benchmark overnight lending rate by three-quarters of a percentage point, to 3.5 percent." U.S. News reports that, in private, Bernanke is expressing fear that the United States is falling into a recession that "will be much worse than he has admitted to publicly." Last Friday, President Bush announced a $145 billion economic stimulus package meant to reassure the "health of the broader economy."

The dramatic downturn in global markets over the weekend, however, sent an umistakable message that investors lacked confidence in the President's "grasp of the depth of the problem." Center for American Progress Senior Fellow Christian Weller writes that Bush's proposal "is not targeted enough to get the biggest bang for the buck from the sizeable spending increase he proposed, and it does not include an answer to the threat of sharply lower house prices."

THE ECONOMY'S WEAK UNDERPINNINGS:

Meeting with House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Harry Reid (D-NV) yesterday, Bush said that the current economy is "inherently strong" and simply needs a "boost." Ed Lazear, Bush's Chairman of the Council of Economic Advisers, added, "The structure of the American economy is sound."  In fact, such happy talk overlooks the fundamental weaknesses of the U.S. economy -- a weak labor market, large budget deficits, massive trade deficits, low productivity growth, and a nationwide decline on house prices. The Philadelphia Fed reported yesterday that the economies shrunk in 23 states -- including Ohio, Missouri, and Arizona -- last month and was stagnant in seven others. For years, the Bush administration has been ignoring these structural deficiencies and masking them with record amounts of debt.

HOW WE GOT HERE:

Since the beginning of the current business cycle in early 2001, family incomes in the United States have not risen, yet the costs for important consumer items such as housing, health care, transportation, energy, and food all climbed at often breathtaking speeds. To afford these necessities, families buried themselves in deeper and deeper debt relative to their income -- "at a rate more than four times faster than that in the 1990s." Partly due to the Bush administration's laissez-faire, deregulatory approach to the markets, lenders preyed off low-interest rates and offered risky loans, financing them by borrowing heavily overseas. As a result, a vicious cycle of debt has resulted from the meltdown in the housing market, and the burgeoning crisis has enveloped foreign investors and markets.

HOW WE GET OUT:

Bush's plan to get America out of its economic doldrums is to offer tax rebates and business tax cuts, a package that fully or partially excludes an estimated 65 million taxpayers who would be the most likely to spend the money to help our ailing economy. Business lobbies are already trying to add targeted tax cuts to the stimulus package.

But tax rebates alone are not good enough. What is needed instead is some display of economic competence from the Bush administration and conservatives in Congress. The Center for American Progress Action Fund has crafted a proposed stimulus package with a number of components targeted on spurring demand, including measures such as expanding unemployment insurance, increasing food stamp benefits, and dealing with rising energy costs. But above all, the plan notes, no stimulus plan is complete without solving the housing crisis: "Nothing policymakers could do in 2008 would be more important to the economic prospects of American families and the national economy than actions to stem the decline of home values." As part of this effort, "Congress should create a refinancing vehicle for creditworthy homeowners who cannot refinance because they owe more than the house is worth." House Financial Services Committee Chairman Barney Frank (D-MA) has indicated his desire to "expand availability of federally insured mortgages for subprime borrowers as part of the economic-stimulus plan being negotiated
with the White House." Moreover, beyond a temporary stimulus, a long-term plan is needed. The Center for American Progress has put forward a plan for the next administration to transform America's economy through clearn energy, innovation, and opportunity.

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