No guarantees in stimulus
BY TERRY SAVAGE Sun-Times Columnist Feb 7, 2009
A man walks past a sign at a Wal-Mart store Thursday in Cleveland. The big exception in Thursday's parade of weak retail sales was Wal-Mart, which posted a 2.1 percent increase in same-store sales, excluding fuel.
Updated: May 3, 2013 12:14PM
It now appears that the Senate and House will pass separate forms of a stimulus bill, which will then go to committee for compromise, probably by the end of this week. There's simply too much political pressure to get something, anything, done to help constituents deal with rising unemployment and the continued economic slowdown.
It's likely to be a bill that doesn't please either side of the political spectrum. Republicans charge, with some justification, that the bill is full of "pork" -- pet projects that the Democrats were unable to get through Congress in the last eight years. But if Republicans had to hold their collective nose over some of the spending programs in the House bill, the Democrats had to accept tax cuts that went far beyond their wishes.
The overall question is whether the stimulus is enough, and whether it will work to get the economy going again. With more than $50 trillion in global stock and real estate losses to offset, even the likely $800 billion in stimulus spending may not be enough to make much of a dent in the problem.
Infrastructure vs. in pockets
Then, there's legitimate debate over the thrust of this bill. Only 5 percent of the spending goes to infrastructure, which creates long-term benefits. Yet infrastructure spending is the kind of stimulus that takes a while to make an impact.
In that category, money to improve the nation's electric grid or support green energy programs is truly worthy -- but may not have a quick impact. And the few billions targeted for these projects are not nearly enough to complete the projects. Increased Pell grants will help students stay in school and fund the long-term goals of an educated population. But, again, that's a stimulus that will not be felt immediately.
Those looking for immediate results are pleased that much of the money in the bill goes directly to states to help pay bills for everything from salaries to Medicaid nursing home care. That state spending keeps more people from being laid off and helps keep public services going.
In both House and Senate versions, the president gets his promised tax cuts. Households making $250,000 or less will get a $500 cut for individuals, $1,000 for a couple. But those benefits won't be felt until tax returns are filed and refunds are paid.
Many argue there's a more direct way to get money into the hands of the public, simply by immediately cutting the payroll (Social Security) tax. That would leave more money in paychecks, available for spending. It would be direct help for needy lower-income people who don't benefit from income tax cuts simply because they don't pay income taxes.
Will ANY stimulus work?
Both sides ignore the experience of Japan, which went through a major economic depression in the 1990s -- a slowdown that was not helped by a wave of stimulus programs. In Japan, consumers hoarded what money they had, fearful of spending their cash or believing that prices would drop further.
The lesson from Japan's experience is that while government spending is important, it can't automatically produce confidence. The only thing it's sure to produce is big budget deficits.
And that's The Savage Truth.