In My Opinion: Money in Workers' Pockets - Now - Is the Needed Stimulus

One thing that congressional Democrats and Republicans and the White House all agree on is that there should be a federal tax cut.

But then come several questions yet to be hammered out: How big a cut overall? How should tax relief be distributed across income groups? How quickly will the cuts be phased in?

The nature of the debate has changed sharply since last year’s presidential election campaign. Candidate George Bush then was selling a big tax cut, largely aimed at relief for the rich, based on sunny projections of budget surpluses of some $5.6 trillion over 10 years.

At that time, everyone except Federal Reserve Chairman Alan (Mr. “Irrational Exuberance”) Greenspan seemed to be marveling at the recession-defying quality of the “New Economy.”

The New Economy’s promise sounded like Garrison Keillor’s imaginary Lake Wobegon on the radio: “A place where all the women are strong, all the men are good looking, and all the children are above average.”

During the campaign a year ago, Bush’s tax cut was to be a jolly windfall from excess funds — funds yet to be collected — in the federal coffers. And of course, getting a big surplus off the government books, from the conservative viewpoint, would keep those liberals in Congress from spending “the people’s money” on social programs in future years.

Then came the dot-com crash and an economic slump, and by-now-President Bush shifted gears and started talking down the economy and selling his tax plan as an economic stimulus.

Bush is correct that the economy needs a “jump start,” but he forgot to bring the jumper cables.

An economic stimulus is needed right now, not five years from now as the White House plan calls for. There would be little stimulus under the administration proposal until April of 2002 and then 89 percent of the cuts wouldn’t kick in until 2006, according to the Economic Policy Institute (EPI).

The best answer lies in putting cash in the hands of Americans immediately to spur consumer spending and boost the economy. That would have real impact, and it would provide a psychological lift to the markets by demonstrating that our leaders truly get it.

A front-loaded tax cut plan with immediate relief makes sense if we’re really talking about an economic stimulus. A back-loaded plan stretched over many years such as the administration’s will be of no help, and in fact it gambles that projected surpluses will really be there five to 10 years down the road.

That’s a big gamble. A bear market and sluggish economy for several years could turn big surplus projections into a mirage. No corporate board would think to estimate future profits, or declare dividends, a decade down the road.

Senator Joe Lieberman and others have proposed an across-the-board cash “dividend” payment immediately of $300 to every taxpayer, $600 to a couple, to give the economy a shot of adrenalin. And a change in tax brackets will provide an additional rebate this year and into the future. This would raise consumer spending right now by “enough to matter in a $10 trillion economy,” according to the EPI’s report.

This would get money into the hands of families that need it and are likely to spend it on necessary goods and services and pay down credit card debt.

After taking action like this to avert an economic downturn, it would be appropriate to look at permanently reducing tax rates in line with realistic projections of future budget surpluses as well as spending needs.

In doing so, we need to make sure that we refund the “people’s money” fairly.

The president’s plan would hand 43 percent of the tax cuts to the wealthiest 1 percent of Americans, which he justifies by claiming they also contribute the most. Actually, he would give them double the 21 percent share of income and payroll taxes that this group really pays. Overall, 71 percent of the benefit of the Bush plan would go to the top one-fifth in income, the privileged and the investor class.

Those are the president’s people.

In CWA, we want to see a decent share of the surplus funds get back in the hands of our people, the working families who earn less than $100,000 a year, who work hard — often with two wage-earners in the house — who pay taxes without benefit of loopholes and shelters, and who are the true engine of America’s productivity and economic growth.


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