Economic Stimulus Package

Weeks ago, President Bush has signed the economic stimulus package. The package will include tax rebates and business tax cuts. Greg Mankiw criticized this action when the CEA (Council of Economic Advisers) has stated that $168 billion stimulus package would create 500,000 jobs this year— “In other words, each job created adds $336,000 to the national debt” (Mankiw). Taking Mankiw’s extremely sarcastic remarks into consideration there is a controversy between left-wing think tanks and right-wing think tanks.

The liberal think tanks such as EPI claims that with the tax rebate, people would spend more money buying goods. With more than a million people receiving the benefit, it will have multiple effects in the economy which would make a “dent in the twin trends of rising unemployment and shrinking retail spending” (Nancy Cleeland-EPI). They have been claiming that the government should spend 1% of their GDP to help the poor; such as tax rebates, individual supports and accelerate public investments. But at the same time, they are against the business tax cut— which was not on their strategy report— because it will just give benefits to the rich ones.

The conservative think tanks are supporting the business tax cut because they believe it will “increase business investment, which would create jobs and strengthen the economy” (Hederman— The Heritage Foundation). They are against tax rebates because looking back at 2001, the tax rebates were not directly used to buy products— which they believe was a waist of federal spending. Bloomberg has said that it is “like giving a drink to an alcoholic” (The New York Times). The AEI was against economic stimulus and to fix U.S. tax code (Hassett). Many opinions are given hoping that the economy of the United States would recover. Robert Kuttner gave a different suggestion before the bipartisan stimulus package has passed— “instead of debating the finer points of a "stimulus" package, or the Fed's next rate cut, Congress and the White House should get together to rescue the housing sector. Home equity represents the greatest part of the net worth of the American middle class.”

Grazie