Economist Kevin Hassett, an adviser to Republican presidential candidate John McCain, described the proposed $145 billion economic stimulus package being negotiated by President Bush and the Democrat-led Congress before it was unveiled, this way: "It's like borrowing money from the Chinese that we can then drop from a helicopter." (That quote comes from Chronicle staff writer Carolyn Lochhead.) McCain is a long-road kind of guy and his stimulus package essentially involves making the Bush tax cuts permanent and reducing the corporate tax rate to create jobs.
Later the deal was announced. As the Washington Post reported, "rebates" of up to $1,200 will go to working families, including those who do not pay federal income taxes, an idea they had roundly rejected in past stimulus plans. While Democrats won "rebates" for those who do not pay taxes, they did not win an extension of unemployment benefits and an increase in food stamps and low-income heating assistance; having given on the issues of "rebates" for those who do not pay income taxes, Republicans won cuts in business taxes to spur job growth.
Edward Lazear, chairman of the president's Council of Economic Advisers, noted, "I find it surprising that people use words like recession" when the nation's unemployment rate is at 5 percent.
In an election year, Democrats and Republicans can agree on one thing. They can always get together on a plan to give away money -- especially in an election year.
I can't say they're wrong. And because they're going to do it anyway, I hope they're right.
Chad Stone, chief economist for the Center on Budget and Policy Priorities, supported a stimulus package that would send checks to low-income workers who do not pay federal income taxes. If the economy is slowing, Stone argued, such a stimulus package would prompt families living from paycheck to paycheck to spend more -- and that should boost confidence in the market.
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To my concern that the stimulus package is more deficit spending, Stone has a good answer: This is a one-time shot that won't keep adding to the deficit. And: "Stimulus is triage. You worry about the long-term health of the nation; you do things you wouldn't do to a healthy nation."
From Bushworld, Lazear argued that a stimulus package would keep an economic slowdown from becoming a recession. Look at it, he said, as an insurance policy to keep "a half million Americans working who otherwise would not have jobs."
As for my fears about deficit spending, Lazear countered, "The deficit right now is very low" -- 1.2 percent of gross domestic product -- so "let's not get hysterical about it." The big problem looming over the country comes not so much from annual federal spending, but from unfunded Social Security and Medicare promises.
Once again, the easy thing -- spending money we don't have to send individual voters checks as big as $600 -- can be seen as the right thing to do. It's an argument of bad short-term behavior for a good long-term gain.
Meanwhile, the day of reckoning -- paying off the $35 trillion in unfunded mandates that amounts to $156,000 for every American man, woman and child -- awaits.
Stanford economics professor John Taylor, also a McCain adviser, noted that McCain's opposition to personal rebates in favor of permanent tax cuts is "quite courageous. Just to increase the budget deficit by $150 billion and have marginal impact is not good policy."
That's the other hitch in this stimulus package, whatever it might be: It better work.
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