America may be about to get the debate it needs on how to get the economy moving. By going for broke -- as in flat broke -- President Bush seems to have awakened sensible critics from a long national snooze. The unexpectedly lavish $674-billion "growth and jobs" stimulus plan he announced Tuesday in Chicago, like the $1.35-trillion tax cut Congress passed in 2001, is focused on helping the wealthy. But the first tax cut package hasn't revived the economy -- and neither would Bush's latest proposals, at least not with any speed.
House Democrats, finally understanding that they have to do more than complain about Bush, countered with a $136-billion, 10-year proposal that would do more of what a stimulus package is supposed to, yet cost far less. Their plan would offer the unemployed $18 billion in benefits, give $31 billion in aid to beleaguered states and provide $32 billion in business incentives. It also would be temporary -- most of the money would be spent in the first year, so it wouldn't saddle future generations with trillions of dollars in government deficits, as the Bush plan certainly would.
Some of the president's proposals are on target. Like the Democrats, Bush would extend temporary federal unemployment benefits for some of those out of work, but unfortunately he did not endorse help for many others who have already exhausted temporary benefits. Bush also proposed creating state-administered $3,000 "personal reemployment accounts" -- about 1.2 million unemployed would be eligible, according to the White House -- that would fund child care, job training and relocation transportation. He would expand the per-child income tax credit from $600 to $1,000. Only $4 billion, less than 1% of the whole package, would be for non-tax-cut purposes, a wire service analysis says. States, hoping for a little help with their huge debt, would get nothing.
Bush's proposed tax cuts, which include speeding up income tax reductions and eliminating taxes on stock dividends, are decisively weighted toward the rich and might not spur anything in the short run. Corporations are mired in record debt, so they would be unlikely to issue much in the way of dividends. There's also the fairness problem. Anyone making more than $1 million a year would save a hefty $45,098 in dividend taxes, according to the Urban-Brookings Tax Policy Center. (That's about what Vice President Dick Cheney would have saved on last year's return.) Most middle-class investors wouldn't benefit at all because their only stocks are in tax-deferred retirement plans.
The stock market, which rose Monday in anticipation, stagnated Tuesday, apparently after taking a sober look at the package's probable effects and likelihood of passage.
Potential stumbling blocks include Sens. John McCain (R-Ariz.) and John B. Breaux (D-La.), who have jointly voiced reservations. Breaux, instrumental in passing the 2001 tax cut, denounced the Bush plan as far too expensive, predicting it won't pass the Senate; McCain says he worries about further rewarding the most affluent. Democrats like California Sen. Dianne Feinstein, who voted for tax cuts in 2001, have made it clear they won't go along this time. Consistent with his previous approach toward Congress, Bush has entered the budget battle with maximal demands. Unlike two years ago, congressional moderates at least seem to be showing some spine.