A “Stimulus” Bill Without Real Stimulus

What the Congress is offering us as their solution to the current economic crisis is rather like the popular Crab Rangoon served at Chinese restaurants, where the word “crab” appears in the name of the dish, but it has become traditional for the role of crab to be played by some sort of cream cheese. Congress has just passed something they call a “Stimulus Package” but the chef forgot to put any actual economic stimulus in it.

Yes, the bill does include some payoffs to core constituencies on the left, but I’ve read the whole thing and as pork goes it’s fairly light weight. The big payoffs are to environmental groups like the $600 million to buy alternative fuel and electric vehicles for the GSA, to unions like the NEA which gets a fat $50 million in grants, to other parts of the education establishment in the form of extensive student loan programs, and big money for social engineering projects like $1.2 billion for youth jobs programs, $2 billion for low income daycare and $3.2 billion for early head start pre-kindergarten programs — soon to be mandatory in a government school near you.

What the bill does not include is genuine economic stimulus of the kind which will grow the economy, keep businesses operating and create substantial new jobs in the long-term. Instead it includes measures based specifically on the assumption that it will not stimulate the economy and that things will only get worse. More money for welfare programs and food stamps, an extension and increase of unemployment benefits, more funding for medicaid, almost $100 billion for education programs, $140 billion for infrastructure improvements which will provide only a few short-term jobs, and a small but costly tax credit for individuals.

It’s not a stimulus bill, it’s a crisis extension bill with some bandaids for the additional suffering which it will create. At a price of over $800 billion with no revenue generation it means expanding the deficit, printing more money, further devaluing the dollar and increasing inflation. That takes spending power directly out of the pockets of consumers and nothing in the bill can possibly compensate for that. It’s like robbing someone at gunpoint and then offering him a nice new wallet when he has nothing left to put in it. By its very nature, deficit spending cannot produce economic stimulus, because it takes more value out of the economy than it can possibly put back in.

There are vital ideas which are not in the bill which would produce real economic stimulus, provisions for long term job creation and to encourage real economic growth, measures which would both help people with their immediate problems and ultimately grow the economy to produce more government revenue to help balance out the massive misdirected spending of the past few years. The way to achieve economic growth, meaningful job creation and generate more government revenue, is through very specific tax cuts which would cost substantially less than the price for the bill as it currently exists.

The first step would be to cut the corporate tax rate. Not only is the corporate tax rate too high overall, but it currently has a bizarre structural defect where some small businesses with net profits of $100,000 to $335,000 pay more than businesses with millions of dollars in net profits. Those small businesses pay at a rate of 39%, higher than the corporate tax in any other nation in the world. The 35% which most other companies pay is higher than any other developed countries but France and Japan. The high corporate tax is directly responsible for many companies offshoring important aspects of their business specifically to avoid paying corporate tax. If we can make the US into a tax haven instead of driving businesses away, relocated companies will bring new jobs with them. Cutting the corporate tax rate to 15% would make us competitive with the most business-friendly countries, and the cost in lost revenue would be no more than a quarter of the cost of the proposed “stimulus” package, and would likely be made up quickly by the growth in the business community.

The second step would be to genuinely stimulate the economy and restore the value of the savings and investments of the 54% of the population invested in the stock market in some form, by eliminating the capital gains tax. Not just cutting it, but eliminating it altogether. The immediate loss in tax revenues would again be less than a quarter of the cost of the proposed “stimulus” package, and that would be made up quickly by the increase in GDP and personal wealth and income which would result from direct stock market stimulus. This would immediately take pressure off of those most vulnerable in the current economy, because the unpoular truth is that those who have nothing don’t really lose anything in an economic downturn, but the middle class who have assets which can become devalued are very vulnerable.

Finally, we should consider preserving one aspect of the current plan, the spending on infrastructure. But rather than financing it through more deficit spending it ought to be financed directly through a substantial increase in the gas tax of at least $1 per gallon sold. This would produce revenue of up to $300 billion a year which could be allocated specifically to infrastructure programs with an emphasis on construction projects which generate a lot of jobs. At current prices the resulting price of gas would still be lower than it was earlier this year, and it would continue the trend of encouraging consumers to use less gas and use public transportation more.

The current bill is just a spending bill without real stimulus. Massive deficit spending will only worsen the current economic situation. Doing nothing would do less harm to the economy. The three proposals outlined here would do more to help the economy with real stimulus than all of the irrational deficit spending currently being considered. Wouldn’t it be remarkable if Congress had the good sense to put aside partisanship and ideology and consider doing the right thing for the people for once. That’s the kind of change we’re really looking for.


About Dave 536 Articles
Dave Nalle has worked as a magazine editor, a freelance writer, a capitol hill staffer, a game designer and taught college history for many years. He now designs fonts for a living and lives with his family in a small town just outside Austin where he is ex-president of the local Lions Club. He is on the board of the Republican Liberty Caucus and Politics Editor of Blogcritics Magazine. You can find his writings about fonts, art and graphic design at The Scriptorium. He also runs a conspiracy debunking site at IdiotWars.com.

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