America's Economic Challenge
Bush Plan Fails to Boost the Economy, Repeats Past Mistakes
The Democratic Stimulus Plan: Fair, Fast Acting, and Politically Sound
January marked the beginning of the third year of the Bush Recession. Across the nation, workers continue to lose their jobs. Nationwide, 800,000 laid off workers lost their benefits on December 28. In the state of California, our budget deficit has mushroomed to $35 billion dollars while unemployment has risen to 6.5 percent.
As millions of people are out of work and the economy continues in a weak and jobless recovery at best, it is important to have a strong and immediate economic program that will put money in the hands of consumers now.
Last month the President announced his plan to deal with the slow economy. Unfortunately, rather than a job-creating plan to immediately address the economic troubles faced by ordinary Americans, the Bush Administration is continuing its failed economic policies of tax cuts primarily for wealthy Americans that will blow a hole in the deficit and threaten economic growth. And only 15% of the Bush package will take effect this year, meaning that most of the any economic impact of the program would not be felt until 2004 and thereafter.
The centerpiece of the plan – the complete elimination of all taxes on stock dividends – will primarily benefit the wealthy, instead of putting money in the hands of most hard-working Americans who will pump it back into the economy. According to preliminary estimates by the non-partisan Tax Policy Center, 45 percent of the benefits of the entire Bush proposal will go to the top 5 percent of taxpayers (who have an average income of $350,000). In fact, those making over $1 million will see an average tax break of $88,800, more than 100 times the tax cut for the vast majority of taxpayers making less than $75,000.
As the non-partisan Congressional Budget Office concluded last year, “tax cuts that are targeted toward lower-income households are likely to generate more stimulus dollar for dollar of revenue loss — that is, be more cost-effective and have more bang for the buck — than those concentrated among higher-income households.” That is because higher-income families are less likely to put that money back into the economy, by spending it. So by targeting their tax cuts on the wealthy, the Bush Administration has undermined its stimulus effect.
Furthermore, the Bush plan would worsen the current budget deficits that have ballooned since the Bush Administration took over. The Bush plan would increase the deficit by nearly $700 billion over 10 years. Not only does this threaten key investments, like Social Security and Medicare, this growth in deficits could promote higher interest rates and threaten to worsen the economy, instead of spurring economic growth.
Democrats have put forth an alternative stimulus plan, one that delivers an immediate boost for our economy. The House Democratic alternative economic stimulus package is fast acting, fair and fiscally responsible. It focuses on jump starting the economy now and quickly moving the United States to a long-term growth agenda.
The Democratic economic stimulus plan, aimed at those who need it most, avoids increasing the deficit and helps states that are deeply suffering during this recession. The Democratic plan will immediately target $18 billion dollars to extend unemployment benefits for laid off workers who have already exhausted their claims and, in addition, provide much needed relief to cash strapped states and localities.
The Democratic plan provides immediate tax relief for small businesses to generate investment and jobs; allocates additional funds for transportation, homeland security and health care; and extends unemployment benefits for workers whose insurance has run out and who have been unable to finds jobs. The plan also puts money in the hands of consumers who drive the economy by giving a $300 tax rebate to every working American ($600 for couples).
Unlike the Republican tax plan, which favors the wealthy by providing tax cuts on stock dividends, and does little to grow the economy, the Democratic stimulus package focuses tax cuts on lower and middle class taxpayers and actually will cost less than the Republican plan. In addition, the Democratic plan will spur the economy by providing funding for homeland security that targets rebuilding our nation’s long neglected infrastructure.
Most important, the Democratic plan is fiscally responsive and
fair. It provides the proper amount of targeted economic stimulus
and at the same time will not impact the budget deficit.
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