The Urban-Brookings Tax Policy Center issued a very handy report card yesterday on the stimulus effect of the House version of the American Recovery and Reinvestment Act, H.R.1. They based their grades upon how timely ("bang for the buck") and well targeted they estimated each stimulus proposal would be if enacted. This analysis was prepared by some of the best tax economists and budget experts in Washington. I recommend it to policymakers and to the public as a rare comparison of the relative effectiveness of stimulus policy options.
B+ "Making Work Pay Tax Credit" $145.3 b. 10-year cost
B+ Increase refundable child credit $18.3 b.
B Increase Earned Income Tax Credit $4.7 b.
B 5-year Net Operating Loss Carryback $15.0 b.
C+ Refundable First-Time Homebuyer Credit $2.6 b.
C "American Opportunity" Education Credit $13.7 b.
C Enhance small business expensing $5.1 b.
C Extend bonus depreciation $0.04 b.
C Renewable energy credits $20.0 b.
D Incentives to hire unemployed $0.2 b.
Alternative proposals for stimulus, please
Where are they? Nothing from this group? How about the Republicans, what is their alternate proposal? All I see is a negative response to the Obama plan . . .
Stimulus
The Tax Policy Center is one of the best groups of tax and budget economists in Washington. I thought their approach was innovative, although somewhat subjective.
The Republicans have proposed cutting the 25% marginal tax bracket to 10%, exempting all unemployment benefits from taxation and a host of business tax cuts. The first two would help mostly upper middle class taxpayers, and business tax cuts are generally less stimulative than individual tax cuts.
One of the joys of doing policy in Washington is getting ravaged by the naysayers. It's a lot easier to be a critic than a doer. In times like these, we need more doers.
Stimulus proposal
Go to Senator Jim Demit web site. He has a very specific proposal which will create 7.5 million jobs not 3.5 to 4mm that Obama declares with the pork laden stimulus bill
Do nothing is one
Do nothing is one alternative.
Even Obama economic advisors Christina Romer and Jared Bernstein predicts that even without the "recovery plan," unemployment returns to Q1'09 levels by Q3'11. See Figure 1:
http://otrans.3cdn.net/45593e8ecbd339d074_l3m6bt1te.pdf
Doing nothing is not an option
Q1'09 unemployment problem is severe (I think we lost over 100,000 jobs just this week) . . . and waiting 18-24 months to get BACK to the unemployment disaster unrolling right now (we're in Q1'09) is a terrifying prospect.
So doing nothing means that we continue to lose about 500,000 more jobs a month this year (another 6 million jobs lost) . . . and more foreclosures, continuing downward deflation spiral in housing, accelerating layoffs which lead to reduced consumer spending and more layoffs.
And infrastructure won't magically fix itself . . . this stimulus is badly needed for many reasons . . .
I can't believe the Republicans voted against it . . . big risk . . . could be a huge mistake.