Strategy for economic rebound

Smart stimulus to counteract the economic slowdown

Published on Economic Policy Institute, by Lawrence Mishel, Ross Eisenbrey and John Irons, January 11, 2008.

Because the United States is either already in a recession or is headed for one, policy makers need to act now to craft an effective economic stimulus package to spur growth and job creation. Without a stimulus of sufficient magnitude, the U.S. economy is likely to see a decline in growth or even a formal recession, leading to higher unemployment, declining or stagnant wages, and a host of other economic problems. A package that provides $140 billion of stimulus – 1% of GDP – would begin to reverse our economic course by creating an additional 1.4 to 1.7 million jobs …

… Criteria for an effective stimulus plan:

There is always debate over what an effective stimulus package should look like. Many different policies are purported to stimulate the economy, but it is important to distinguish between those that will have their effect in the very near-term to offset rising unemployment this year and those policies that have longer-term effects. Any useful stimulus package should strengthen the recovery immediately and create more jobs in 2008. Some obvious examples of policies that fail this criterion are the ones just suggested by the Bush administration, including eliminating the estate tax and extending the high-end income, capital gains, and dividend tax cuts beyond 2010. These policies have nothing to do with the job creation we will need in 2008.

An effective, appropriate stimulus package should meet the following five criteria: …

… Conclusion:

Given the tremendous damage that a recession does to the employment, income, and health of millions of Americans, Congress should act quickly to keep the economy from stalling. A total package of $140 billion in federal spending on infrastructure improvements, aid to the states, additional weeks of unemployment compensation, and flat tax rebates would boost demand, create approximately 1.4 to 1.7 million jobs, (18)and help keep the economy from sliding into a deep recession.

Endnotes (1 – 18): … (full text).

Link: TIME TO BOOST ECONOMY IS NOW, EPI ADVISES – Economic stimulus plan makes case for quick, strong, well-targeted action to soften blow of coming recession.

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