The $800 Billion Gamble: Economists Say Stimulus Cuts Could Be 'Disastrous'

Senate Majority Leader Harry Reid, pushing for fast action on the stimulus bill, turned to a well-worn maxim: "We should not let the perfect be the enemy of the good."


The bill the Senate is expected to send to a conference committee as soon as Tuesday includes provisions -- particularly the $69.8 billion one-year "patch" on the alternative minimum tax (AMT) -- that key economists and budget specialists say are less likely to have the maximum anti-recessionary impact than direct spending provisions calling for substantial purchases by all levels of government.

The Senate has compounded the weaknesses in the bill by sharply cutting what economists agree are essential ingredients of a stimulus bill, including $40 billion in aid to states and $16 billion for school construction.

The reaction to the changes adopted at the behest of a small but key group of "centrist" Senators -- Maine Republicans Susan Collins and Olympia Snowe, Ben Nelson (D-NE) and Arlen Specter (R-PA) -- was strong.

"The compromise is worse than the original bill because it is smaller, and the changes appear to have reduced rather than increased the bang-for-buck effectiveness of the bill," said Berkeley economist J. Bradford DeLong, who was a Deputy Assistant Treasury Secretary during the Clinton administration. "Ben Nelson and Susan Collins don't appear to have understood what they were doing very well -- the point is to keep lots of extra Americans from being unemployed for the next two years and have them, instead, do useful things for the country. Nelson and Collins, well, it's not clear what their objective is."

Understand the importance of honest news ?

So do we.

The past year has been the most arduous of our lives. The Covid-19 pandemic continues to be catastrophic not only to our health - mental and physical - but also to the stability of millions of people. For all of us independent news organizations, it’s no exception.

We’ve covered everything thrown at us this past year and will continue to do so with your support. We’ve always understood the importance of calling out corruption, regardless of political affiliation.

We need your support in this difficult time. Every reader contribution, no matter the amount, makes a difference in allowing our newsroom to bring you the stories that matter, at a time when being informed is more important than ever. Invest with us.

Make a one-time contribution to Alternet All Access, or click here to become a subscriber. Thank you.

Click to donate by check.

DonateDonate by credit card
Donate by Paypal

Don't Sit on the Sidelines of History. Join Alternet All Access and Go Ad-Free. Support Honest Journalism.