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EPI comparison of the Daschle and Bush economic stimulus plans

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POLICY MEMORANDUM

SUBJECT: EPI comparison of the Daschle and Bush economic stimulus plans

FROM: Larry Mishel, EPI president

DATE: January 28, 2003

In a December 2002 Briefing Paper, Generating Jobs and Growth: An Economic Stimulus Plan for 2003, EPI identified five criteria for an effective stimulus plan. A comparison shows that the stimulus plan released by Senator Tom Daschle last week meets all five of these criteria, while President Bush’s plan fails on every count.

Criteria #1: A stimulus package should generate jobs and growth.
The Daschle plan would create more than a million jobs in the next year, three times as many as President Bush’s plan. It will also help the states protect jobs in education, police and fire protection, and other vital services. Unlike the Bush plan, which according to top econometric forecaster Economy.com will cost an estimated 750,000 jobs over 10 years, the Daschle plan will have no negative long-term effects.

Criteria #2: A stimulus package should be fiscally responsible.
The Daschle plan does not rob from future generations to provide large tax cuts for those who need them the least. It puts money into the economy now, when it’s needed most. In addition, the plan will take action against corporations that avoid paying their due in taxes by setting up special tax havens. By contrast, the Bush plan will cost $670 billion over 10 years.

Criteria #3: A stimulus plan should take effect quickly.
The Daschle plan puts $141 billion into the economy in 2003, compared to $50 billion in the Bush plan.

Criteria #4: A stimulus plan should be fair.
The Daschle plan puts money into the hands of middle-income working families who need it most and are most likely to spend it. Through $300 rebates for each adult in a family and $300 for each of the first two children, the plan would return $71 billion to families in 2003. In addition, the plan would extend federal unemployment insurance benefits for the one million individuals who exhausted their benefits in 2002. Given the increasingly unequal distribution of income in the United States, a stimulus plan that exacerbates this inequality is not acceptable. The Bush plan’s benefits disproportionately go to wealthy Americans who do not need extra cash and are more likely to save the money than to put it back into the economy.

Criteria #5: A stimulus package should target unmet needs.
The Daschle plan provides $40 billion to preserve vital state services, including $6 billion to ensure that every classroom has a qualified teacher and that vital services like after-school care and summer enrichment programs are available for the nation’s children. It also provides $4 billion for mass transit, highway, and airport infrastructure. The Bush plan adds no new funding for these purposes.

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