Posted on Mon, Sep. 22, 2008
last updated: November 24, 2010 01:49:37 PM
WASHINGTON — Congressional Democrats are pushing for a new $50 billion economic-stimulus plan as a way not only to jolt the economy but also to help themselves politically in November's elections.
The plan would include new spending for infrastructure, an extension of unemployment benefits, energy assistance to lower-income families and aid to states to help pay Medicaid health-care costs for the poor. Democratic presidential nominee Barack Obama touts the plan almost daily.
"This plan can't just be a plan for Wall Street," he told a Charlotte, N.C., audience Sunday. "It has to be a plan for Main Street. We have to come together, as Democrats and Republicans, to pass a stimulus plan that will put money in the pockets of working families, save jobs and prevent painful budget cuts and tax hikes in our states."
Most Republicans sharply disagree. They note that negotiators from Congress and the Bush administration already are eyeing a financial-rescue package that's estimated to cost $700 billion.
With this fiscal year's federal budget deficit already headed over $400 billion, and next year's likely to top that, "sooner or later there will have to be a reckoning," said Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee.
Republican presidential nominee John McCain wants a more measured approach to stimulating the economy. He's proposed creating a blue-ribbon commission to study regulatory and economic policy, and has said that if he's elected, he'll carefully review federal spending and will eliminate or slash bloated programs in the first 100 days of his administration.
Independent economists also are unenthusiastic about a new stimulus.
A $50 billion plan, said Brian Bethune, chief U.S. financial economist at Global Insight in Boston, would add only about half of 1 percent to the gross domestic product, roughly the same as the February stimulus added.
David Wyss, chief economist at Standard & Poor's, thought even that was optimistic. Because the plan would involve spending on infrastructure, it would take time to show economic gain, he said, so the impact on GDP growth, in the short run, could be as small as one-tenth of 1 percent per quarter.
The White House likes to boast that the GDP jumped 3.3 percent in the second quarter after the stimulus last spring, but Bethune noted that that was driven largely by exports.
A new $50 billion plan, he said, "would provide some juice, and more spending would probably lead to more investment. But it's not going to be big."
"It would be really hard for the economy to feel much effect," added Nicolas Bollen, a professor in finance at Vanderbilt University in Nashville, Tenn.
Obama and Democratic congressional leaders keep pushing for the plan, however, and not solely for economic reasons.
"It's about defining a difference between Democrats and Republicans," said House Speaker Nancy Pelosi, D-Calif., though she added, "We hope there isn't one."
White House Press Secretary Dana Perino signaled that there probably is.
Transportation Secretary Mary Peters, Perino said, "is one of the foremost experts in the country on infrastructure projects, and no, we do not believe that that would have short-term positive economic-stimulus impacts on the economy."
Republicans say they're unafraid of Democrats painting them as coldhearted.
"How much more are we going to add to the deficit when we're in this economic downturn?" asked Sen. Jon Kyl, R-Ariz. "That all has to be paid for by taxpayers, and I wouldn't have thought that would be the smartest thing right now."
Some analysts saw the Democrats' push as important to Obama, since it offers voters a concrete plan to help them immediately and signals that his party wants to help consumers as much as it helps big banks and insurers. Also, they argue, the public isn't that concerned about the federal budget deficit.
"It's really important for Democrats to help Obama push his agenda, and to the public, $50 billion is really small potatoes," said James Hoefler, a professor of political science at Dickinson College in Carlisle, Pa. "Everybody has a memory of the bridge in Minnesota falling in the water, so it makes sense to help infrastructure."
No, it doesn't, countered Daniel Mitchell, a tax-policy expert at Washington's Cato Institute, a libertarian research group.
"The stimulus is one of the most laughable things I've heard recently," he said. "It only makes sense if you're for wasteful spending."
ON THE WEB
McClatchy Newspapers 2008