January 29, 2009

GETTING BACK ON MESSAGE:

House Passes Stimulus Package (JONATHAN WEISMAN, GREG HITT and NAFTALI BENDAVID, 1/29/09, WSJ)

The package, which would cost more than the entire Iraq War, would reverse the Bush administration's approach to boosting the economy. That approach relied heavily on tax cuts that tended to put money in the pockets of middle-class and more affluent Americans. The $275 billion in tax relief offered in the stimulus package focuses more on lower-income families. It also includes business incentives to spur job creation and a $500 payroll tax holiday for workers.

The 244-188 vote was not what Mr. Obama had hoped for. A week of presidential wooing -- including a visit to the Capitol, a return visit to the White House by moderate House Republicans and a bipartisan cocktail party Wednesday night -- did not yield a single Republican vote. The president also lost 11 Democrats.


It's a godsend to the GOP which just needs to bang on the same point over and over: we'd have cut taxes by this amount and given it back to you to spend as you see fit, rather than take your taxes and have a Democrat Congress spend the money on pet projects.


MORE:
How About a Payroll Tax Stimulus? (LAWRENCE B. LINDSEY, 1/29/09, WSJ)

And what of the plan being put forward now? As crafted, it is unlikely to produce the desired results. For a similar amount of money, the government could essentially cut the payroll tax in half, taking three points off the rate for both the employer and the employee. This would put $1,500 into the pocket of a typical worker making $50,000, with a similar amount going to his or her employer. It would provide a powerful stimulus to the spending stream, as well as a significant, six percentage point reduction in the tax burden of employment for people making less than $100,000. The effects would be immediate.

By contrast, the stimulus now under consideration would suffer from the usual problems of government spending. The Congressional Budget Office and the Joint Committee on Taxation have calculated that only $170 billion, or about one-fifth of the $816 billion package will be spent in fiscal 2009. An additional $356 billion will be spent in 2010. That leaves $290 billion to be spent when even the most pessimistic forecasters think the economy will be in recovery mode.

Posted by Orrin Judd at January 29, 2009 10:33 AM
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