I am beginning to sound like a broken record. And all I have to do is open the newspaper for more fodder.
And as of Monday, we get this good news about job cuts: 50,000 from firms like Caterpillar, Sprint-Nextel, Home Depot, Pfizer, GM and Texas Instruments. Perhaps what is most surprising is not that the jobs are disappearing, but that sectors across the board are losing jobs.
And so the Obama stimulus is being bantered around Capitol Hill with both sides of the aisle getting their ducks in a row.
Currently, the plan calls for $825 billion over two years. The proposal calls for about two-thirds to go toward medium- and long-term stimuli: infrastructure, energy, education and health care.
All of these are worthy, and necessary, economic goals. But these should be part of a broader "industrial policy" geared toward medium- and long-term growth. Much of the proposed projects will take years to implement and will pay substantial dividends, but not for years to come.
There are elements of the proposed legislation that can provide a short-term boost, such as weather-proofing a home, helping the poor keep health care and infrastructure repair, which also yield long-term benefits. And these are the types of projects that should be stressed to stimulate the economy.
I also worry that Congress will be unable to keep its snout out of the pork buffet.
New pet projects with little gains to anyone outside the immediate beneficiaries should be left out. This is not the time for regional gerrymandering but what is good for the entire economy - and that might be a bitter pill to swallow for some regions.
The remaining one-third is to fund tax breaks. While politically savvy, it should prove to be less than successful - as have all recent tax breaks.
First, despite the argument that state "taxpayers know what to do with their money better than the government," none of these guys want to admit this assumes that the tax cuts will be spent at all and on U.S. goods.
Readers will no doubt tire of hearing me rant about astronomical consumer-debt ratios, low private savings rate, declining wealth (stocks and real estate) and how maybe, just maybe, how they affect consumers' behaviors. Especially when they already have bought all the flat-screen TVs and iPods they can.
And what are they going to buy with "newfound income?" Five hundred dollars doesn't do much on a down payment on a new sport utility vehicle. Maybe they'll buy new jeans (made in Latin America)?
And who are the tax breaks going to?
About 85 percent of federal income taxes are paid by the richest 25 percent. The lowest income - 50 percent - account for only about 5 percent of total taxes.
So, calls for lowering the tax rates on the two lowest brackets won't do much to boost the spending of poor families.
Because lower-income families spend a higher percentage of their income, perhaps we should consider temporarily lowering payroll taxes that would have the largest affect on poor families.
Of course, we would have to borrow from Social Security and Medicare trust funds or fund them with other sources (or, God forbid, actually reform the whole system altogether), but this would provide a shot in the arm.
There is also an argument for lowering taxes on business. Corporate taxes account for about 9 percent of federal receipts, and given most firms' investment decisions are based more on expectations than tax incentives, we could probably target the money more effectively (like loans).
This package was intended to prevent a deeper recession. As such, the powers that be should concentrate on short-term stimuli and not necessarily down payments on future investment or favorable tax breaks for long-run economic health.
These projects require time to be effective and shifts in resources. Hence, they deserve thoughtful discussion and policy analysis.
You know, in the long-run.
firstname.lastname@example.orgRobert "Tino" Sonora is an assistant professor of economics and co-director of the Office of Economic Analysis and Business Research at Fort Lewis College.