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Stimulate Me February 7, 2009

Posted by Kate Ryan in Barack Obama, Democrats, Economic Stimulus, National Politics, Republicans, US Senate.
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us_economyThe economic stimulus negotiations winding their way through the Senate this week apparently reached a compromise last night.  According to news reports, “Traitor Joe” Lieberman joined forces with Susan Collins and Arlen Spector to strip over $100 billion in spending from the bill and bulk up on the Republican favored tax cuts.  Can you tell me again who won the election?  Because from where I’m sitting, it certainly doesn’t look like it was the Democrats.  Harry Reid, Senate Majority Leader, said that the “bill wasn’t perfect”, but it was an effective compromise.  For whom?  Not for the unemployed, or people who lost their health insurance, or homeowners in foreclosure, or schoolchildren, or any of the 47 states that are operating at huge deficits and need infusions of federal cash.

President Obama and the Democratic party have allowed – no invited – the minority Republicans to define this debate.  All the news shows have Republican “leaders” on the tube sanctimoniously saying that the Democratic-favored package is “just a spending bill”.  Well, duh!  By it’s very definition, stimulus IS spending.  The government has to inject cash into the economy to get it moving again and you don’t do that by providing tax cuts to businesses.  For every dollar the government gives up in tax cuts to businesses, it only gets back – at the most – 37 cents.  See the chart below:

courtesy Media Matters

courtesy Media Matters

Mediamatters.org published this chart on Friday as part of their story on how the news pundits are perpetuating this myth that the spending in the bill is “welfare”.   The chart was devised by John Zandi of Moody’s – a former economic adviser to John McCain.  

All this negative coverage and Republican spin has all the “Joe the Plumbers” out there gobbling this with a spoon.  Public support for the stimulus has dropped to 58%.  Meanwhile, the unemployment rate jumped to 7.6% yesterday and more job losses line the horizon.  It seems as though we WILL get fooled again.

I say Congress just scraps everything but infrastructure and industrial spending out of the bill.  Then, instead of tax cuts, the government should give direct stimulus to the people.  Every person in America would be able to apply for a grant to pay off 50% to 100% of either their mortgage debt or their consumer debt.  You could submit your total debt as of December 31, 2008 and the government would pay it off on a sliding scale depending upon your 2008 AGI – phasing the grants out after $175,000.  People that are unemployed or in foreclosure would be paid first and get the max.  For example, if you are unemployed and don’t own a home, but you have $10,000 in credit card debt, the government would pay it all and give you a clean slate.  If you make $150,000 and have a $300,000 mortgage, the government would pay $150,000 off and help you renegotiate the remaining balance at a lower rate. 

How would this help?  For the unemployed guy, if he doesn’t have to use his money to pay off consumer debt, he can concentrate on making sure his rent and utilities are paid, feed his kids, and continue his health insurance.  For the person with the mortgage that is strangling him because home values have declined, it takes away 50% of the bad debt – making the value more in line with market.  In both cases, lenders get their money back and that will stabilize them.  It also makes borrowers more credit-worthy, so they may start lending again (with tightened requirements – no more no documentation loans).  It’s a win-win, in my book.

Anything is better than another tax cut.



Kate Ryan - February 7, 2009

Tom, I feel for California. Here in New York we’ve been told that the state’s UI fund will be running out of money by mid-March. meanwhile, Washington fiddles while we all burn.

1. Tom Awtry - February 7, 2009

In the early 80’s I read an article claiming “if California broke away from the United States, it would be the 6th richest country in the world.” Times have sure changed, now the “Golden State” is on the ropes and could be counted out in regards to a $42 billion dollar deficit.

If you wanted to renew your Driver’s License or either change or receive your Registration last Friday, at the Department of Motor Vehicles, you were out of luck – state wide. Many other California governmental offices were also closed, which in turn, forced the closure of many businesses across the state too.

Governor Schwarzenegger ordered furloughs for some 200,000 state government workers to help save money as he and lawmakers try to find a way to close California’s $42 billion budget deficit.

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