It's Time for a Permanent Stimulus Package
As the Obama transition team prepares a serious stimulus package for passage in January, it's time to consider whether this should be a one-time only deal, or a consistent, long-term tool for stimulating the economy, rebuilding the middle class, and addressing the vast economic inequality in America.
Many pundits are now warning the incoming Obama Administration not to make the stimulus too small. I agree with them. We should also not make it too fleeting.
After years of trickle down economics, the pendulum seems to be swinging back toward demand-side, rise up economics. But how far will it go? The initial stimulus package will only go so far to get our economy going again. The infrastructure spending will get some projects going, but it's not a comprehensive solution for increasing consumption and stopping the contraction of the economy that is beginning to snowball.
Tax cuts for the middle class will help a little, especially if they are reflected immediately in workers' paychecks. But they are too small to make much of a difference. Other policy solutions will also help, such as health care for all and making it easier for workers to form unions through the Employee Free Choice Act. But all of these solutions will take time to have an effect--time we may not have.
After spending $700 billion to bail out financial institutions, $13 billion for Detroit, another $700 billion or so for the next stimulus, what will we really have achieved? Will people start spending again? Will banks start lending? Will the economy stop contracting?
It's only by getting money directly into the hands of working people who will spend it that we will turn this economy around.
What we need is regularly scheduled stimulus payments directly to working people, which will increase consumption and fuel the economy, while also providing a level of economic security that is unheard of in American society.
Every American making less than $100,000 a year should get a $12,000 refundable tax credit, paid out in $1,000 monthly installments, tax-free.
Providing this basic, independent income to working people is the most effective way to jump-start consumption. Having a stable source of income that can always be relied upon will give consumers the confidence to spend again. Increased spending will revive American businesses and encourage banks to lend once again, allowing us to finally put the brakes on our rapidly contracting economy.
This full-blown program of Rise Up Economics will not just lead to economic recovery. It will provide economic security for all at a time where wages have declined over the past eight years (after remaining stagnant for 30 years). It will help rebuild the middle class by giving a boost up to low-wage workers and by supplementing the declining wages of families in danger of dropping out of the middle class.
There is a rich history of support for a guaranteed annual income, from Tom Paine and Henry George, to Huey Long, to Francis Fox Piven and Martin Luther King, Jr. But only now, during the most frightening economic disaster since the Great Depression, does it seem possible to provide a basic income to all.
The biggest obstacle to establishing a basic income has always been: how will we pay for it? Well, we're already spending over a trillion dollars on the bank bailout, small tax rebates (what can anyone do with $600 anyway?), loans to Detroit, and the upcoming January stimulus, and there's no guarantee that it will lift us out of the recession.
Where did we come up with the $10 billion a month that the invasion and occupation of Iraq has cost? In times of need, we find the money.
Now, in our biggest time of need, why not spend a trillion dollars annually to provide economic security for all and lead us on the road to permanent economic recovery?
Once we are on the road to recovery, we can look at helping to pay for it all by increasing taxes on the very wealthy (how is it that the top tax bracket is only at $250,000?) taxing carbon and stock transactions, and eliminating corporate tax loopholes.
But for now, if we're going to go into massive debt to stave off another depression, shouldn't we do it in a way that gets money directly to the people who need it, instead of putting it in the hands of corporate CEOs and failing financial institutions? Shouldn't we establish a stable, consistent stimulus policy that gets the money directly where it needs to be?
It's too early to tell if President-elect Obama will replace the tired trickle down economics of the Republican past with a coherent policy of rise up economics, or if he will stay in the middle of the road with relatively minor spending increases. Our nation's economic future could depend upon the answer.