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Economic Recovery Plan Must Not Be Weakened With Failed Bush-Era Theories

Last week, the House passed the American Recovery and Reinvestment Act, working from priorities shared with President Barack Obama.  This week, the Senate is set to finish action on this measure so that a final economic recovery package can go to the President next week for his signature.   

As we work toward bipartisan consensus, the President has made clear that any modification that changes the focus from creating jobs and transforming our economy from top to bottom or that weakens the economic impact of this package is unacceptable.
 
“It is not merely a prescription for short-term spending - it's a strategy for long-term economic growth in areas like renewable energy, health care, and education.  

“Now, in the past few days I've heard criticisms of this plan that echo the very same failed theories that helped lead us into this crisis - the notion that tax cuts alone will solve all our problems; that we can ignore fundamental challenges like energy independence and the high cost of health care and still expect our economy and our country to thrive.  

“I reject that theory, and so did the American people when they went to the polls in November and voted resoundingly for change.”

- President Barack Obama [2/4/09]

The American Recovery and Reinvestment Act will:

  • create and save 3 to 4 million jobs, rebuilding America, making us more globally competitive and energy independent, and transforming our economy for long-term growth.
  • give 95 percent of Americans an immediate tax cut.
  • invest over $100 billion in roads, bridges, mass transit, flood control, clean water projects, and other infrastructure projects.
  • invest quickly into the economy - 75% in the first 18 months.

The Recovery Plan has unprecedented accountability measures built in--providing strong oversight, an historic degree of public transparency, and including no earmarks.

Below are selected comments highlighting the impact of government investment to our restoring and revitalizing economy:
 
In a recent analysis of the American Recovery and Reinvestment Act, Mark Zandi, chief economist for Moody's Economy.com, provided a table detailing “Fiscal Stimulus Bang for the Buck” [Page 9]. The analysis shows the return to the economy for every taxpayer dollar invested. Some of the highlights:

   Bang for the Buck
 Tax Cuts     
 Non-refundable Lump-Sum Tax Rebate     $1.01
 Refundable Lump-Sum Tax Rebate     $1.22
 Make Dividend and Capital Gains Tax Cuts Permanent     $0.38
   
 Spending Increases  
 Extending Unemployment Insurance Benefits     $1.63
 Temporary Increase in Food Stamps     $1.73
 General Aid to State Governments     $1.38
 Increased Infrastructure Spending      $1.59


Robert Reich, University of Berkeley Professor and former Secretary of Labor

“The only way to create or preserve jobs is through additional spending. And unlike tax cuts used to pay down personal debt or add to savings, every dollar of government spending flows directly into the economy and adds to overall demand.” [Marketplace, 2/4/09]

 Paul Krugman, Nobel Prize winning economist

“…it's clear that when it comes to economic stimulus, public spending provides much more bang for the buck than tax cuts…This suggests that public spending rather than tax cuts should be the core of any stimulus plan.” [New York Times, 1/25/09]

Dean Baker, Co-Director of Center for Economic and Policy Research

“Spending that is not stimulus is like cash that is not money. Spending is stimulus, spending is stimulus. Any spending will generate jobs. It is that simple.” [American Prospect, 2/3/09]

Allen Sinai, Chief Global Economist at Decision Economics, Inc.
“The U.S. is in the midst of a long, deep and severe downturn. When we do recover, the engine will be government spending...” [Bloomberg, 1/11/09]