WASHINGTON — Any successful stimulus package must replace the lost income of displaced workers and boost demand for goods and services offered by businesses. Here's a look at some ideas under consideration.
- Extending unemployment insurance: The 2001-2002 stimulus extended unemployment benefits by an extra 13 weeks. Temporary extensions give immediate income to workers who've lost jobs while they seek others, boosting consumer spending.
- Expanding food-stamp programs: This provides immediate relief for the poorest and is felt in the economy within 60 days, according to the Congressional Budget Office.
- Uniform tax rebates: By giving all Americans tax rebates of, say, $500, disposable income would be put in everyone's pockets. When Japan tried this, many people saved instead of spent. "I don't think that would be a problem here," said David Wyss, the chief economist for Standard & Poor's in New York.
- State fiscal relief: Many states have balanced-budget requirements. When tax revenues fall, states must raise taxes or cut spending, both of which further slow the economy. The federal government could provide more direct aid to states, and/or temporarily increase the federal share of Medicaid costs and reduce the states' share.
- Business tax credits: President Bush and Congress are studying temporary incentives to spur new investment or bring planned investment forward. This could range from tax credits for investments to accelerated tax write-offs of assets that depreciate.
- Making tax cuts permanent: Bush has repeated his call to make permanent the 2001 and 2003 tax cuts. Doing so, he says, creates economic certainty. True, but it'd do little to immediately stimulate the economy.
- Infrastructure programs: Some lawmakers and the U.S. Chamber of Commerce call for greater highway and bridge spending. This would create jobs and boost productivity. But such projects take time to start and wouldn't provide any immediate relief.
- Cutting corporate capital gains: The U.S. Chamber suggested Tuesday that Bush could do what he did for individual taxpayers and slash the capital gains taxes paid by businesses. With a smaller tax penalty, companies would be more willing to sell their assets, thus sparking activity. True, but absent an offset for lost tax revenues, this would add to the federal deficit to weaken the medium-term economic outlook.
McClatchy Newspapers 2008