Weekly Update (1/25/08)

Economic Stimulus Package; Who Really Gains?
This week the White House and Congress reached a deal on an economic stimulus package totaling $150 billion in relief. While the package does have admirable goals it will not go far enough in assisting those who truly need the help, and will not stimulate the economy anywhere near enough to keep out of recession.

The main thrust of the package will give most individual tax filers refunds of up to $600, married couples up to $1,200, and an additional $300 for each child. The package also allows businesses to immediately write off 50% of purchases, and permits small businesses to write off additional purchases of equipment. The other main target of the bill concerns the housing market, and raises the limits on loans and mortgages the Federal Housing Administration (FHA) and Fannie Mae and Freddie Mac can purchases from $362,000 and $417,000, respectively, to $725,000.

The main problems with what the bill addresses is that the economic stimulus provided for will not come for many months, and that it targets people who are not in as desperate need and will not boost the economy. The tax refunds will take many months to actually reach the hands of consumers, especially considering that the IRS is about to start gearing up for the tax season, this additional responsibility will only slow them down. It is unlikely that the rebate checks will be mailed out before late spring or early summer, which is an extremely long time to wait considering the dire state of today's stock and housing markets.

Secondly, raising the FHA limits will only help people who are looking to buy more expensive homes, namely the upper-middle class. Those who need the economic stimulus, the lower and middle classes, will not receive much, if any, benefit from this provision.

Thirdly, while the package will be putting money into the hands of most Americans, many of us will chose to pay down old debt or put the money into savings, which does not help boost a sagging economy. Paying down debt and putting money into savings are wonderful ideas, and the smart financial decision to make, but if the economy needs help the best way to do this is by getting the money to people who will spend it immediately, such as those who will use the money to buy groceries or other necessary items. The people most likely to do this are lower income individuals and families, which brings up where the economic package falls far too short.

Democrats wanted to include provisions that would extend unemployment benefits past the 26 week limit and boost food stamp benefits. These provisions would address all of the current problems with the bill: it would get money into peoples hands immediately, it would go to the people who need it the most, and it would be put into the hands of those who would boost the economy best. Unfortunately, Republicans and conservative Democrats cut these provisions from the bill, leaving many top Democratic leaders upset.

In order for a more progressive, more common-sense, bill to make it through Congress we would have needed a greater number of progressive Democrats in Congress. If we had the numbers to override a veto than there would have been no reason to compromise these important provisions. Help elect progressive Democrats to the US House of Representatives by donating to DAPAC today!