Friday, January 24, 2003
Daschleomics-The senior senator from South Dakota has his version of a stimulus package out. This piece on the Daschle plan that Kos points out is worth walking through, as is the actual plan itself. Does it stand a chance of getting passed? No, but this would be what the Democrats would waive to the public as what they would do if they were in charge. Let's take a look.
"We need an economic plan with a single overriding goal of helping the economy, and helping the economy now," he said in the speech. "The president's plan is not economic stimulus. More than 90 percent of the tax cuts wouldn't get to the taxpayers until after 2003."Ol' John Maynard has a manure-eating grin in his grave. If you think that the economy's big problem is of excess capacity, then the Bush plan won't be too stimulative. However, if the problem is in part a lack of interest in saving and investing, then the Bush plan will be stimulative, since businesses will start investing money in plant and equipment now to take advantage of those future tax cuts.
The measures proposed by Daschle would expire after one year and carry a price tag of roughly $140 billion, far less than the $674 billion, 10-year plan that Bush has issued.Repeat after me. Perm-en-ent In-come Hy-poth-e-sis. A temporary tax cut is more likely to be saved, not spent, since people will realize its a one-time thing and not change their spending patterns much. Bush's would average $67B/year, while Daschle's would be twice that big. Once the cuts are put in place, it will be hard to rescind them.
Bush's plan proposed the elimination of the tax on dividends, and called for the acceleration of some of the income tax cuts that Congress approved two years ago — two elements that Daschle and other Democrats have criticized and that Daschle omitted from his own plan. "If we're looking at a short-term economic goal, if we want to get the biggest bang for the buck in the shortest period of time, the dividend tax cut is not it," Daschle said.One short-term economic goal of the Democrats is to keep the money in Washington. Another is to make any tax relief temporary so they can go back and spend it again when the economy recovers. A long-term tax cut isn't a good idea in their mind, for it shuts down programs that they prize.
Daschle proposed a tax cut of $300 per adult and an additional $300 per child, up to two children per family. Adults would qualify even if they have no federal tax liability, as long as they pay Social Security... and Medicare payroll taxes.Note in the full text of the proposal that this only goes to people who are employed. It doesn't include the retired and may not include the self-employed, depending on Daschle's definition of payroll taxes. You could see seniors going to get a one-day temp job in order to get their $300 tax break.
Daschle also proposed additional tax breaks for businesses, including more generous depreciation designed to encourage companies to invest in new equipment. He also called for a tax credit to help small businesses pay for health insurance premiums and proposed a credit for businesses investing in broadband high-speed Internet equipment.The depreciation allowance might help boost capital spending, but the health-insurance premium one would be a non-starter, for businesses are unlikely to start offering health insurance with just a one-year break. Aw, cute, they gave the Ideopolis a bone. Everybody turn to song 14 in the John Kerry hymnal, just the first verse. Either that, or AOL has Mrs. Daschle on retainer.
The aid to the states and local governments includes about $15 billion with no strings attached, as well as about $25 billion more to be divided among Medicaid, education, homeland security and highway and mass transit construction.Soo-eee! soo-eee! Everybody sing "If we ever needed the Lard before, we sure do need It now." No good Democratic stimulus package would be complete without some goodies for their union buddies. In the Homeland Security section, we've got 25,000 additional "first responders on the street" (Billy Jeff, wherefore art thou). It has a $6 billion education package to "ensure that every classroom is led by a highly-qualified [translation-NEA or AFT member] teacher" and $3 billion for cities. This looks more like electioneering than good economics. Give the working people (but not the retired) a tax cut. Through the geeks a bone. Give the construction unions, the firefighters and cops and the NEA some goodies, and make it temporary, so the cost doesn't look as big.
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