The stimulus bill's cost and priorities

February 2, 4:24 PMProgressive Politics ExaminerJay McDonough

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To date, the Congressional Republican's efforts to derail the economic stimulus package revolve around two major complaints; it's too much money and the money will be misspent.. 

Now, even the most partisan of stimulus proposals have all asserted it's going to take about $900B to get the economy restarted.  And the complaining Republicans have only managed to identify less than 1% of the total expenditure to criticize.  For all their criticism, the GOP has been noticeably short of alternative proposals for jump starting the economy.

The two Republican proposals getting the most traction are the House Republican and Senator DeMint's “American Option: A Jobs Plan That Works" plan.  Both proposals are built around the premise that non-refundable tax cuts are the way to prosperity.

The DeMint plan includes permanently cutting the corporate tax rate, totally eliminating the Alternative Minimum Tax, lowering income tax rates for the wealthiest Americans, and eliminating scores of tax deductions that help students pay for college, sick families pay medical bills, and teachers purchase supplies for their classrooms. (Link)

The Center for American Progress Action Fund took a look at Sen. DeMint's plan and calculated the cost relative to the current stimulus bill.  As the DeMint plan includes permanent non-refundable tax breaks, the cost (or lost revenue) totals $3.1T over the next decade. 

Pretty clearly, it's not that the current stimulus bill is too expensive to the GOP.  They're prepared to spend three times that amount.

But what about the Republican argument that more stimulus could be provided with tax cuts than with infrastructure and other spending increases? 

In July, 2008 Mark Zandi, chief economist at Moody's Economy.com testified before the House Committee on Small Business and presented data on the relative stimulus efficiency of various approaches.  Here's a summary:

Based on the Moody data, spending increases do the best job at stimulating the economy and the non-refundable tax cuts proposed in the House Republican and DeMint's "American Option" plans offer no stimulus.

During his testimony, Mr. Zandi said:

On the face of it, increased infrastructure spending appears to be a particularly efficacious way to stimulate the economy.  The boost to GDP from each $1 spent on building bridges and schools is estimated to be a large $1.59, and who could argue with the need for such infrastructure?  ...if projects that could be started quickly can be identified, they could prove to be an efficacious stimulus.

It does seem curious that the GOP would cling so tightly to this notion of tax cuts as stimulus.  Even after spending $168B in the spring of 2008 and seeing only 20% of that coming back to stimulate the economy, Republicans tout these tax cuts as the be all, end all solution to every economic problem. 

The GOP has become the embodiment of one of P.T. Barnum's most famous quotes:  "If you can’t dazzle them with dexterity, baffle them with bull."