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Debate: Bush economic stimulus plan
From Debatepedia
[  ] [  ] [  ] [  ] Is George W. Bush's economic stimulus plan justified and beneficial for the U.S economy?
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Background and context
President Bush called for a $145 billion economic stimulus package on January 18, 2008. The plan centers
on tax breaks for consumers and businesses to rejuvenate the lagging U.S. economy. The principles
outlined by Bush opened a path to an agreement with congressional Democrats that could put as much as
$800 in each taxpayer's pocket by spring. The reaction in Congress revealed a divide between Democrats
on the campaign trail, who assailed Bush's proposal, and those in Washington, such as House Speaker
Nancy Pelosi (Calif.), who expressed optimism about reaching an agreement with the White House.
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[  ] [  ] [  ] [  ] Affordability: Is the plan affordable?
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[  ] Yes
- The Bush 2008 stimulus package is affordable - The $140b included in the stimulus plan is about 1% of GDP. That is a reasonable price to pay to attempt to stimulate the economy. It is not too much and not too little, but just enough.
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[ ] No
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[ ] [ ] [ ] [ ] [  ] Fighting crises: Are recessions necessary?
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[ ] Yes
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[ ] No
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[ ] [ ] [ ] [ ] [ ] Tax rebate: Is the proposed tax rebate a good idea?
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[ ] Yes
- Tax rebates to the lower-middle classes quickly stimulate consumption - Rebates put money into the hands of the lower and middle classes, who are more likely to spend their money on services or consumer goods. This is precisely the kind of economic kick that is needed in the economy. In addition, it is necessary for this money to be infused into the economy fast. Tax rebates to the lower and middle classes achieve this, since these groups are more likely to spend the money fast. Therefore, a tax rebate to the lower and middle classes is well targeted.
- Bush's 2001 tax rebate succeeded in stimulating the economy Numerous sources indicate that, in 2001, the rebates Bush provided of $300 to individuals and $600 to families had a significant impact on the economy. Various sources indicate that between 1/3 and 2/3 of the total rebate was spent in the first six months of the stimulus. Numerous sources indicate that the recession that year was relatively mild due to these steps, and could have been much worse otherwise. While the recession began in March it was over by November, even despite the September 11th attacks of that year.
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[ ] No
- Tax rebates do not always lead to increased spending/stimulation The tax rebate plan is based on a failed premise: that taxpayers will immediately spend the rebate money they receive on consumer goods. But, with the current housing problems and huge debt, the money will probably not be spent on consumer goods, and rather to pay off loans. Furthermore, statistics show that Americans are gradually saving and conserving their money more often, which would be counter-productive to the plan.
- President Bush's 2001 tax rebate failed If a case study is sought, this is the most recent example of the failure of the 2001 Bush tax rebates to help stimulate the economy. Numerous studies conclude that the 2001 tax rebate was a failure.
- A tax rebate is merely wealth re-distribution Technically, no American is gaining any money under this plan because taxes in future years will have to increase to cover for the $145 billion loss in the federal budget. "Injecting" money into the economy now means withdrawing money from the economy later. Therefore, the plan is a form of wealth distribution that passes much of the burden onto future generations that are not to blame for current economic failures.
- Tax rebates don't encourage wealth production Tax rebates are a cash give-away. There is nothing in them that increases incentives for workers to be more productive; whether they work hard or not, they will still be receiving the same tax rebate. Tax-cuts, on the other hand, incentivize increased productivity by creating a dynamic in which, if workers put in more hours and earn more money, they will be able to keep more of that money, instead of paying it away in taxes.
- Tax rebates encourage irresponsible consumer spending habits This is particularly true in Bush's 2008 stimulus package, which aims to give a tax rebate to the lower and middle classes specifically because these classes are more likely to capriciously spend the money on consumer goods. Yet, given the debt-laden financial circumstances of the lower and middle classes, they should be using this money to pay down debts or simply should be saving the money. Therefore, the stimulus from a tax rebate depends directly on lower and middle-class consumers spending irresponsibly. Exploiting irresponsible behavior should not be the aim of economic stimulus packages.
- Measures that encourage saving help stimulate the economy It is often claimed that tax rebates for the middle and lower classes are good for the economy because they go toward spending rather to savings. But this assumes a false view of savings. If someone deposits money in their savings account at a bank, the bank is infused with more cash to lend out, which stimulates the economy. And, savers frequently save by investing, which stimulates capital flows, economic growth, and job creation.
- Tax Rate Cuts, Not Tax Rebates, Stimulate the Economy Although tax rebates, increased unemployment benefits and other short-term payments may feel good and appear superficially attractive, they do very little to actually boost the economy and improve Americans' well-being. Rather, cutting tax rates, not mailing tax rebates, is what stimulates prosperity. This is a critical distinction. The primary reason why tax rebates don't work is that they merely redistribute existing wealth, as opposed to creating new economic growth or encouraging innovation and entrepreneurship. They do nothing to encourage risk-taking, investment or enlargement of the wealth pie, but instead re-slice the existing pie in a zero-sum manner.
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[ ] [ ] [ ] [ ] [ ] Extended unemployment benefits: Would this be helpful?
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[ ] Yes
- Extended unemployment benefits help bolster confidence/spending Unemployment benefits are a critical backdrop for employed individuals. If their unemployment benefits are low, they may feel that it is important that they hedge against any possible risks of future unemployment by spending less and saving more. This is not stimulating for the economy. If unemployment benefits are increased, employed individuals will feel more confident in their decisions to spend money now, even if it does so happen that they are laid-off in the future; the extended unemployment benefits will still keep them secure. Therefore, UI provides a boost of confidence to workers in their choice to spend money and help stimulate the economy.
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[ ] No
- Unemployment insurance does not stimulate the economy - Few studies indicate that extending unemployment benefits helps stimulate the economy. Why this is the case is fairly straightforward. While it may be true that extended unemployment benefits makes some existing workers more confident that they can spend freely and still have a good safety net, those that are in the safety net of unemployment insurance feel too comfortable, and may not quickly search for new jobs. At the same time, employers use UI to hold together laid-off workers without paying them in times of low demand, waiting until things get better to finally re-hire workers. If UI is extended, employers will wait longer to re-hire laid-off workers they have on-hold with UI. Finally, UI has a fairly indirect link with consumption, attempting to stimulate confidence instead of providing a direct, sustainable infusion of cash to spend.
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[ ] [ ] [ ] [ ] [ ] Food stamps: Would a temporary increase in food stamps be justified?
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[ ] Yes
- Millions of low-income Americans face undernutrition. Millions of low-income Americans face undernutrition technically termed food insecurity. Food insecurity means inconsistent access to enough nutritious food at all times during the year. Food insecurity can lead to health problems, particularly for infants and toddlers.Even mild to moderate undernutrition in young children is linked to problems that last throughout the lifespan. The federal Food Stamp Program protects low-income Americans of all ages from food insecurity and the more severe condition of hunger by helping them to purchase an adequate diet. Over 25 million Americans rely on Food Stamp benefits to supplement their food budget. About 20 million of those recipients live in households with children. The Food Stamp Program has been shown to be effective and efficient
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[ ] No
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[ ] [ ] [ ] [ ] [ ] Tax reduction options:
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[ ] Yes
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[ ] No
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[ ] [ ] [ ] [ ] [ ] Economics: Does the plan address the underlying economic problems?
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[ ] Yes
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[ ] No
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[ ] [ ] [ ] [ ] [ ] Was the plan implemented at the right time? Does it matter?
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[ ] Yes
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[ ] No
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[ ] [ ] [ ] [ ] Pro/con resources
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[ ] Yes
- Martin Crutsinger. "Paulson Predicts Quick Stimulus Plan". Orlando Sentinel. January 18, 2008
- Neil Irwin and Jonathan Weisman. "Fed Chairman Backs Stimulus Plan". Washington Post. January 18, 2008
- Jay Warren. "Will Bush's Stimulus Plan Help?" WSLS NewsChannel 10. Jan 18, 2008
- Lawrence Mishel, Ross Eisenbrey and John Irons. "Strategy for economic rebound. Smart stimulus to counteract the economic slowdown". Economic Policy Institute. January 11, 2008
- Felix Salmon. "The Bush Fiscal Stimulus Plan: Looks Good to Me". Portfolio.com. January 18th, 2008
- "Bush, Bernanke call for a stimulus plan". CNNMoney.com. January 17th, 2008
- "Amid rising recession fears, tax rebate gains favor as economic stimulus". Chicago Tribune. January 20, 2008
- "Dear President Bush…". Routing by Rumor. January 18, 2008
- "President Bush, Bernanke Deem Short-term Stimulus Package Necessary." FoxBusiness. Jan. 17 2008
- "Fact Sheet: Taking Action to Keep Our Economy Healthy". The White House. January 2008
- "Fed Chairman Backs Stimulus". Washington Post. January 18, 2008
- "Tax Rebate Could be Good for Businesses". Rocky Mountain News. January 19, 2008
- " Tax Rebates & Cash Are Good Stimuli". CBO. January 15, 2008
- " Tax Rebates Could Boost Economy Quickly". AP. January 18, 2008
- "Tax Rebates Could Boost Economy Quickly". Central Florida News 13. Friday, January 18, 2008
- Martin Crutsinger. "U.S. tax rebate plan seen as biggest bang for the buck". The Associated Press. January 18, 2008
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[ ] No
- Robert Bluey. "Government Handouts Won't Help Economy". Townhall.com. January 20, 2008
- Christian E. Weller. "Economic Incompetence: Bush Stimulus Package Misses the Point as Markets Plunge". Center for American Progress. January 22, 2008
- Steve Chapman. "Fiscal Stimulus Folly". Townhall.com. January 17, 2008
- Peter Goodman and Floyd Norris. "No Quick Fix to Downturn". New York Times. January 13, 2008
- Brian M. Riedl. "Tax Rebates Will Not Stimulate The Economy". Heritage Foundation. January 10, 2008
- Louis R. Woodhill. "Stimulus and Superstition. What the economy doesn’t need now is more government mistakes." National Review Online. January 17th, 2008
- Mike Whitney. "Bush's 'Stimulus' Cash Giveaway; 'Gentlemen, Start The Helicopters'". The Smirking Chimp. January 19, 2008
- "The Economic Stimulus Plan: Short-Term Solution, Long-Term Problem". SeekingAlpha.com. January 20, 2008
- Tim Paradis. "Wall Street Draws Little Comfort From Bush Stimulus Plan". The Huffington Post. January 18th, 2007
- "This 'Economic Stimulus' Is a REALLY Bad Idea". Eugene Daily Kos. Jan 18, 2008
- "We're All Keynesians Now". Wall Street Journal, Review and Outlook. January 18, 2008
- "Economic Retardant Package". Cato@Liberty. January 18, 2008
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External links and resources
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