Stimulus Bill Outlined By House Democrats as Senate Budget Sees a Wall of Debt
This morning, House Democratic leaders released summaries of the $275 b. of tax cuts and $550 b. of spending they plan to pass by the end of this month. Committee markups are planned for just after Inauguration Day, and House passage is expected the following week. House Republican Leader John Boehner (R-OH) issued a statement describing the Democratic plan as "disappointing" because it creates over half a trillion dollars of "questionable" spending and lacks enough tax cuts.
Another stimulus bill is necessary, but much depends upon how stimulative it really is. A year ago, Congress and President Bush quickly enacted a $168 b. income tax rebate which does not seem to have done much to stimulate the economy. The bulk of it paid down debt or was saved. Now we're trying again with everything but the kitchen sink thrown in.
Today, at the Senate Budget Committee, three top economists offered their prescriptions for getting the economy moving again. Morgan Stanley's Richard Berner urged Congress to get at the root causes of the crisis by doing much more to mitigate home mortgage foreclosures and to clean "troubled" assets from bank balance sheets. Allen Sinai supported more stimulus, half spending and half tax cuts, but urged substantial long-run deficit reduction because "The United States will be extremely exposed" to rising interest rates after the recovery begins when foreign investors stop buying Treasury debt. Former Congressional Budget Office Director and McCain advisor Doug Holtz-Eakin urged a carefully crafted and smaller stimulus bill weighted more to tax cuts and a big deficit reduction effort once the economy recovers.
Budget Committee Chair Kent Conrad (D-ND) and Ranking Republican Judd Gregg (R-NH) commiserated that they were almost alone among their colleagues in their concern for the long-run credit worthiness of the United States. He also expressed concern for maintaining the value of the Dollar. Conrad drew attention to the "wall of debt" that Americans face in his opening statement and detailed the economic challenges we face, not only in reviving credit markets and in overcoming recession, but in getting control of the massive debts we're incurring once the economy starts growing again. The witness statements are well worth reading as well.
These issues will reemerge in a few months, when Congress will be forced to raise the $11.315 trillion debt limit by at least another trillion dollars just to get through until a year from now. The recent history is debt limit increases tells the story:
October 4, 2008 $11.315 trillion
July 28, 2008 $10.615 trillion
September 29, 2007 $9.815 trillion