High Price for Jobless Aid
Leave it to Congress to pass an economic stimulus package at the very moment that Federal Reserve Chairman Alan Greenspan says the recession is over. The economy grew by 1.4% in the fourth quarter of last year, and this quarter the figure may go as high as 4%. Nevertheless, Sept. 11 did send unemployment up, and workers continue to deserve a helping hand from the government. It is good news that the stimulus package will extend unemployment benefits for 13 weeks and that President Bush has promised to sign it speedily. The bad news, alas, is that the bill is still larded with costly tax breaks for big business.
That there was any compromise at all on the measure is due to a looming anniversary: March 11 marks six months since Sept. 11, and those who lost their jobs in its wake were to soon come to the end of their unemployment benefits. Embarrassed at the prospect, House Republicans caved in on their most extreme demands for corporate tax cuts, at which Democrats were balking. Democrats in turn gave up health benefits for the jobless.
Even so, the bill’s corporate depreciation provision alone will cost almost $97 billion, which is seven times the $14.4 billion allotted to the unemployed over the next three years, according to the Center on Budget and Policy Priorities. This will also damage state budgets. According to the National Governors Assn., the fiscal situation of the states has steadily worsened and they already face a total deficit of $40 billion to $50 billion. Most states peg corporate tax rates to the federal code (California is an exception), and they stand to lose billions more in the coming year from the new depreciation rule. Unlike earlier proposed stimulus bills, this one contains no state financial assistance to offset lost revenues.
At least accelerated depreciation, supported by both parties, stimulates corporate investment--unlike another, more egregious provision. This one extends for five years a tax loophole that allows companies to avoid taxes on money earned abroad in banking, finance and insurance, a rule that encourages multinationals to hide profits through accounting tricks. It may help line the pockets of corporate officers and shareholders, but it will not stimulate domestic economic activity.
It’s always possible that Congress will roll back some of these tax breaks in its next session, and certainly that’s desirable. But House Republicans have vowed not to retreat. They want to launch a new crusade; House Speaker J. Dennis Hastert, for instance, says he wants to wipe out the inheritance tax permanently. Given this fervor, the flawed stimulus package is just the very high price of extending benefits for the unemployed.
At least now the Senate is out of excuses on another piece of legislation that’s been needlessly bottled up. It’s high time to call a vote on campaign finance reform and pass it.
