Doing some research on the recent stimulus package, I came across some fascinating Moody’s data regarding the $152 billion Economic Stimulus Act of 2008. How did the stimulus “stimulate”? Tax-cuts, of course! The stimulus of 2008 was a necessary follow-up to the 2003 stimulus, otherwise known as the “Bush tax cuts.”
The entire Bush administration was one “stimulus” package after another. You see, we’ve known recession was coming for a long, long time now. More importantly, the 2008 stimulus wasn’t concerned with stopping a recession, but merely slowing its advance until it was someone else’s problem.
“This stimulus,” said Moody’s writer Mark Zandi in January of 2008, “will not prevent a recession if one is already on its way, as its benefits will not be realized until summer; however, it could substantially mitigate the severity of any downturn,”
Zandi continues:
“Why stimulus? With a presidential election fast approaching, policymakers have come to a quick consensus regarding the risks of recession and the need for fiscal stimulus. The economy is indeed struggling. Real GDP likely grew near 1% in the fourth quarter of 2007, and the economy appears to be contracting in early 2008. The job market has stalled, Christmas sales were soft, and industrial production has gone flat.
The threat of recession is evident in the recent substantial increase in unemployment. The jobless rate has risen 0.6 percentage points from its 4.4% cyclical low last March to 5% in December. Recessions are always preceded by such a rise, and one has never occurred without a recession ensuing.”
So, why did the Bush administration favor tax cuts? We were told that giving more money back to the wealthiest Americans was the best method for stimulating the economy.
In the face of stale rhetoric about trickle-down economics and welfare queens, one of the biggest economic power-houses in the world lays out the truth. The only government spending which stimulates more than increased infrastructure spending is a temporary increase in food stamps, and extending unemployment insurance benefits.
Among the worst methods for stimulus? The Bush tax cuts, reducing the corporate tax rate, and cutting dividend and capital gains tax rates.
The numbers don’t lie, but politicians sure do.
2 Responses
You know, I have to tell you, I really enjoy this blog and the insight from everyone who participates. I find it to be refreshing and very informative. I wish there were more blogs like it. Anyway, I felt it was about time I posted, thanks!
Posted on March 16th, 2009 at 1:01 am
[...] Invest more money into a social safety net; health care, education and the kind of temporary assistance that is excellent short-term economic stimulus to boot. [...]
Posted on April 3rd, 2009 at 10:14 pm
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