Another Washed Up Economic Plan
For some reason – I must have been bored – I decided to read William Beach’s testimony to Congress on stimulating the economy. Beach, a Heritage Foundation scholar, testified in front of the House Budget Committee on Monday alongside Fed Chief Bernanke and reps from CBPP and Brookings. Suddenly, I found myself transported back to February of this year when wonks and pols were debating how best to restart the economy.
Beach started off well enough, calling for congressional policymakers to support long-term economic growth. I love long-term economic growth!
But then he asserted that economic stimulus should be focused on:
1) tax policy (trans. tax cuts for businesses and the rich);
2) energy policy (trans. “Drill, baby, drill”); and
3) long-term spending (trans. “Starve the beast”).
Was Beach just trying to derail the stimulus train? Had he forgotten, as the Honorable Bernanke even reminded us, that stimulus should accord to the three-t Iron Law of Stimulus: stimulus must be timely (address this crisis, not the next one), targeted (early retiring executives from Lehman probably don’t need help), and temporary (don’t break the bank)?
Indeed, in his testimony Beach supported making Bush’s tax cuts permanent. Even if we ignore the paltry short-term stimulus provided by tax cuts, what long-term gains can be expected from a tax policy that has primarily benefited the wealthy, other than government revenues shrunken still further? True, volatile gas prices will continue to befuddle Americans, but increasing domestic oil production not only takes a long time but would have a very limited effect on oil prices (and certainly a negligible one in the short term). And does Beach’s support for tax cuts not fly in the face of his lament about Congress’s “seeming unwillingness…to seriously address the enormous challenges from entitlement spending”?
I must say that a return to calls for a timely, targeted, and temporary stimulus package is itself probably misplaced. The “iron rule” brought us a stimulus package that consisted of little more than, as Mayor Malloy of Stamford told MayorTV, a chunk of change to buy new TVs. It is time to think about how we can achieve both short-term stimulus and long-term investment, goals that are far from being at odds with each other. But at least the three-T argument brings us closer to a conversation about legitimate means of stimulus, rather than closer to short-term meltdown and long-term disaster.
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Posted at 12:47 PM, Oct 22, 2008 in Economy | Energy & Environment | Federal Budget | Fiscal Responsibility | MayorTV | Progressive Agenda | Tax Policy
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