A stimulus package for all

Indeed, it's been almost two months since the terrorist attacks pushed a weak economy over the precipice. However, it appears that the idea of actually stimulating the economy any time in the near future is just a bit far-fetched for Congress. At least that's what is becoming clear by the fact that Congress cannot agree to the terms and beneficiaries of a stimulus plan.

Just last week, the House approved by two votes a $100 billion economic stimulus package that was applauded by the White House because there is an emphasis on tax cuts over increased spending. Also, the House package includes President Bush's four stimulus priorities, including the necessity of repealing the alternative minimum corporate tax and issuing checks to low-income workers who didn't receive rebates during the last round.

Of course, the House bill did not pass without a fair amount of argument. Especially prominent among the arguers were the House Democrats who believe that business interests are inordinately favored in the bill. But the main difference of opinion centers on the fundamental choice between tax cuts and spending increases.

"If we're going to limit the severity of the recession, we need to quickly nip this in the bud," said Princeton's own economics professor Alan Blinder. Otherwise, the economy will spiral downward as one layoff leads to future layoffs. Week to week, Americans witness on television and in newspapers the local woes that are caused by the ripple effect of a weakening economy. As the national, regional and local economies weaken, so does consumer confidence, a message telegraphed to Congress, which seems far too eager to satisfy each interest's need for protection.

Congress, as representative government, has moved to a new level of effectiveness in bringing the local and regional concerns of its constituents, in an indiscriminant fashion, to the national stage. Congress risks being cast as more opportunistic than usual in trumpeting the unqualified needs of its constituents in a time of economic difficulty magnified by national tragedy.

Even though I can in no way claim to be an economist, Economics 101 has taught me to understand that consumers must have confidence in the economy, and the government can go a long way in boosting this confidence. Indeed, the benefits of a stimulus package, when deployed, would extend beyond the direct effects. By passing the package, the government tells consumers that it is working towards a solution for deteriorating conditions and has confidence that the economy can and will be bolstered.

The termination of this political stalemate is a must. The economy needs help now. And what better way to stimulate the economy than to allow people to enjoy what is rightfully theirs: the fruits of their labor, their property?

In proposing a reduction in high tax rates or simply a general reduction in economic regulation, President Bush's ideas and the House's plan aim at boosting economic performance. Lowering tax rates and eliminating tax burdens will help workers and business owners alike by producing more jobs at a higher income. This outcome will, in turn, lead to greater consumer spending, and that final outcome is of course exactly what the economy needs.

However, a main difference between the House bill and President Bush's version of the stimulus package is the amount of money to be injected into the economy. Bush's package is smaller than the House and Senate versions, and he guards against too large a package in order to avoid potential inflation from over stimulation. This plan, targeting both corporations and lower income workers alike, takes into account the cuts in interest rates made by the Federal Reserve, cuts that bring the interest rate to its lowest in 40 years.

Instead of taking a hint from President Bush, Congress has reached an impasse where Republican and Democrat special interests are in, and the economy is out. What the economy really needs is for Congress to stop arguing over larding the stimulus package with special-interest relief and end this deadlock on both sides of the aisle.

Yes, there are many differing opinions about what the provisions of the economic stimulus plan should be. But instead of catering to special-interest groups, Congress should follow the President's lead. As Chairman of the President's Council for Economic Advisors Glenn Hubbard said, "The perfect should not be allowed to be the enemy of the good." Scott Jeffrey is from Washington, DC. She can be reached at sjeffrey@princeton.edu.