dinsdag, januari 07, 2003

Economic Stimulus Program Speech Impediment
"If you want to know what God thinks of money, just look at the people he gave it to." - Dorothy Parker

President Bush is expected to unveil a $600 billion recovery package today extending unemployment benefits, accelerating 2001 tax reductions, ending taxes on stock dividends and creating new incentives for business investment. If you're anything like me, the details of this economic stimulus plan are about as easy to understand as a Feynman Diagram.

Predictably, the spin on this package goes the same two polar opposite ways most every other debatable idea and topic goes in this country; to the left or to the right, neither of which, as usual, helps any of the rest of us decipher whatever last remaining crumb of truth there is to be harvested.

The moment this plan was unveiled it was denounced by Democrats as a windfall for the rich designed to boost stocks and Bush's re-election chances. The pro-Democrat AFL-CIO on Monday said, in typically hyperbolic fashion, that the plan to eliminate the tax on dividends showed that Bush and "the rich" have "declared war on the working people and the poor of this country." A main bone of contention seems to be the plan to wipe out all federal taxes on stock dividends. Stock dividends?? Who the hell is making stock dividends these days? Even the popular 401(k) retirement savings plan are losing money these days.

However, according to estimates, some 70% of Americans own stock and more than 35 million Americans have dividend income. If this indeed the case, I wonder, logically, how an elimination of the tax on dividends that would benefit roughly 70% of Americans can be a "declared war" on the working people and the poor. Conservative tax activist Grover Norquist, questions "Are Democrats going to say 70 percent of voters are too rich to get tax cuts? That's a hell of a way to organize yourself if you plan to get power through democratic elections."

But as always, there is more to this than meets the eye. Tax filers with incomes of more than $100,000 or more would receive the bulk of the benefit of dividend tax elimination, according to Internal Revenue Service statistics. The wealthiest stratum of Americans - an estimated 200,000 people earning more than $1million a year - accounts for barely 1% of US taxpayers, according to figures from the internal revenue service. However, together they earned about $25.4 billion in dividends last year, or about a quarter of the overall total of dividends for US taxpayers. Referring to data generated by the Tax Policy Center, senator Tom Daschle noted in a radio address that a person making more than $1 million a year would save $24,000 in taxes under the Bush plan while a person earning from $40,000 to $50,000 a year would save only $76.

As usual, the truth is fed to us in tiny bites but we never get the full meal.

The Democrats, by the way, have their own plan and characterized it as "significant, fast-acting, and fiscally responsible." They say it stimulates the job market while Bush's plan stimulates the stock market.

President Bush says: "The critics haven't seen the plan. This is a plan that provides tax relief to the working citizens. It is a plan that is a very fair plan. It is a plan that recognizes when somebody has more of their own money, they are likely to spend it, which creates more jobs."

And my favorite waterboy, presidential spokesmodel Ari Fleischer rejected charges Mr. Bush's proposal favors the rich. "The people who suffer from the biggest deficits in our society are the people who don't have a job, and he wants to put a plan in place to help give a boost to the economy, to give a boost to business investment, to give a boost to American taxpayers so that more jobs are created so that people can go about earning income and feeding their families," he said.

So the race is on already to prove one way or the other that the stimulus plan will or won't stimulate the economy and the tax cuts are or aren't designed to help the rich and screw the poor. Nothing new there.

But perhaps in a concession for the tax cut the Bush team probably knew in advance would be construed as another gouging of the poor for the benefit of the rich, they've added an interesting wrinkle:

A senior administration official Monday night said Bush will propose grants of as much as $3,000 to the unemployed as part of a new program to encourage people to find new jobs quickly. The personal employment accounts will be aimed at those most likely to exhaust their unemployment benefits as well as those who may already have done so.

The $3.6 billion, two-year program is designed to cover 1.2 million Americans. "The way the re-employment bonus works, if you become re-employed within 13 weeks, you can keep the remaining balance," the same senior official said. "It may be the full $3,000 ... or it may be some portion of the $3,000." The money also can be used for training, child care and relocation. The official said this program would be in addition to any extension of unemployment benefits passed by Congress. Well, this is wonderful news if you're unemployed but doesn't amount to a hill of untaxable beans if you happen to work for a living but are still somehow too stoooopid to be rich.

Amid all the screeching and whining, it would seem, viewing only the most surface and rudimentary scorecards that the winners will be the rich and the unemployed. A nice, equitable and balanced combination we should all be delirious with joy about. Question is, in the end, does this economic stimulus plan do what it is supposed to do, stimulate the economy?

UPI reports that "a wide range of economists doubt the president's plan, even beyond the dividend issue, will be of much immediate help to the economy. "It is a tax reduction package, not a stimulus package," argued Stan Collender, the managing director of the Fleishman-Hillard's Federal Budget Consulting Group. He said that though 70 million people hold stock, vast numbers of them hold it in tax-deferred programs and will be unaffected by the dividend measure. "Most of the people who receive significant dividends from stock are likely to be what the critics say: rich," he said.

Even the Wall Street Journal is skeptical, noting "And while praising Mr. Bush's far-reaching aim, even some business analysts worried that his plan risked doing too little to boost the economy now, while damaging long-term finances of states and the federal government. Some industries also fretted that the new plan could undermine their position with investors."

My own personal guess is that the economic stimulation of the job market or the stock market is a rather moot point. The only market stimulation one can seem certain of these days is the stimulation of the war market which unlike the economy, seems pretty damned healthy these days.

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