THE STIMULUS DEAL….Apparently a fiscal stimulus package has been tentatively agreed to by both sides:
Under the deal, nearly everyone earning a paycheck would receive at least $300 from the Internal Revenue Service. Most workers would receive rebates of $600 each, or $1,200 per couple. Families with children would receive an additional payment of $300 per child. Workers who earned at least $3,000 last year — but not enough to pay income taxes — would be eligible for $300.
Rebates would be limited, however, to single taxpayers who earned up to $75,000 or couples with incomes of as much as $150,000.
I guess it could have been worse. Virtually everyone who paid payroll taxes in 2007 will receive $300, and the $150K household cutoff will prevent at least some of the wastage we’d get from giving money to people who are likely to just save it instead of spending it.
(And what’s wrong with saving money, you ask? Nothing. That’s what we’ll do with our rebate, and national savings will thereby increase by $1,200. Hooray! Unfortunately, this is all funded by deficit spending from the feds, and increasing the deficit reduces national savings — in this case by $1,200. Net effect to the economy: pretty close to zero.)
Needless to say, the plan could have been better. The LA Times’ summary of the negotiations between Nancy Pelosi (for the Democrats) and John Boehner (for the Republicans) explains why it wasn’t:
In the talks, Pelosi pressed to make sure tax relief would find its way into the hands of lower-income earners while Boehner pushed to include upper middle-class couples, according to congressional aides.
….Democrats had pressed to extend unemployment benefits for people whose 26 weeks of benefits have run out, but Republicans resisted.
Etc. Basically, Republicans insisted that all aspects of the plan had to take the form of “income tax rebates,” which automatically excludes the poor and favors the well off. It also does a lousy job of stimulating the economy, but who cares about that? Pelosi managed to improve things a bit, but as long as George Bush is in office we still have to make our ritual obeisances to voodoo economics.
Bottom line: I doubt that this plan is going to provide an awful lot of stimulus. But it might do a bit of good, and certainly won’t do any harm. In today’s world, that counts as a win.