Report | Economic Growth

Making the case—again—for an economic rebound

Policy Memo #124

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With federal stimulus checks in the mail this month, it’s worth reconsidering the much-trumpeted bipartisan accord that was reached in January to jumpstart the U.S. economy — and all that it fails to do. For instance, the stimulus deal provides for no extension of unemployment benefits; no aid to cash-strapped states; and no spending on immediate repairs to schools, bridges, ports, and other crucial infrastructure. All of the above were identified by EPI as cost-effective ways to inject money into a shrinking economy, in many cases, creating good jobs in the process. They were not incorporated into the plan then, and despite far worsening economic conditions, efforts to revive the ideas have not gathered sufficient support. In fact, the latest effort toward a second stimulus package in the House, which began with talk of halting foreclosures and building infrastructure, has shrunk down to a minor extension of unemployment benefits tagged onto a supplemental appropriations bill used to fund the war in Iraq.

The good news is that the January deal between House leaders and President Bush puts cash in the pockets of people who are likely to spend it, ratcheting down the payments for individuals who earn more than $75,000 a year. The bad news is that businesses get tax breaks worth an estimated $45 billion this year that will do nothing to get the economy moving again–businesses need customers, not incentives to increase capacity. If there was any doubt of recession in January, it should be gone by now, after four months of shrinking employment, a quarterly gross domestic product rate that is barely above zero, and signs of a pullback in consumer spending.

Here is some of what needs to be done in a second stimulus package to immediately boost the economy, create jobs, and ensure against a prolonged period of economic weakness:

Infrastructure:

Unemployment insurance:

State aid:

Expanded assistance for those most in need

  • With higher food prices straining family budgets, an increase in national nutritional programs (including food stamp benefits) would both help those in need and effectively stimulate the economy.

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