FOR IMMEDIATE RELEASE:
Thursday, November 15, 2001
Nancy Coleman or Tom Kiley, (202) 775-8810
HOUSE STIMULUS PLAN DRAWS CRITICISM FROM NOBEL LAUREATES AND FORMER CEA MEMBERS
Experts call for targeted, temporary measures to fight downturn
Washington D.C. – In a statement sent today to the U.S. Senate, where the future of legislation to boost the economy remains uncertain, nine Nobel laureates in economics and four past members of the Council of Economic Advisers to the President wrote that the stimulus package passed by the House of Representatives would fail to jump start the economy.
To be effective, a stimulus must be “targeted to increase spending immediately,” and “temporary, phasing out when the economy recovers,” said the statement to Senators Tom Daschle (D-SD) and Trent Lott (R-MS). “The bill passed by the House fails on both counts.”
The statement, circulated by the Economic Policy Institute, calls for targeting the temporary benefits of a stimulus package to low-income workers and families, since they will quickly spend the money they receive, thus increasing consumer demand. Permanent tax cuts for wealthy companies and individuals, on the other hand, are unlikely to be spent and will damage the nation’s long-term fiscal outlook, according to the statement.
“The House bill is so loaded with tax cuts for corporations and wealthy individuals, it should collapse under its own weight,” says Jeff Faux, president of EPI, who also signed the statement. “These tax breaks may do wonders for big campaign contributors, but will do little to heal a hurting economy and put people back to work.”
The nine Nobel prize winners who signed the statement are George Akerlof of the University of California at Berkeley, Kenneth Arrow and William Sharpe of Stanford University, Lawrence Klein of the University of Pennsylvania, Franco Modigliani and Robert Solow of the Massachusetts Institute for Technology, Douglass North of Washington University, Joseph Stiglitz of Columbia University, and James Tobin of Yale University.
The four former CEA members who signed the statement are Martin Baily of the Institute for International Economics, Alan Blinder of Princeton University, and Laura D’Andrea Tyson and Janet Yellen of the University of California at Berkeley.
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The Economic Policy Institute is a non-partisan, non-profit economic think tank founded in 1986. The Institute is located on the web at www.epinet.org.
View or download the full statement.