by D. Cupples | It seems that a good way to stave off recession is to put money into the hands of Americans who will spend it -- which fuels businesses, which keeps them from laying off employees, which keeps non-laid-off employees spending money, which keeps money flowing to American businesses, and so on....
It's all about ripple effects. Yesterday, Federal Reserve chairman Ben Bernanke showed support for an economic-stimulus package when speaking to the House Budget Committee, stating that it should be temporary and put into effect quickly. (Reuters)
Unfortunately, lobbyists are lining up for a spot at the trough, which could cause elected officials to muck up the process.
Yesterday's Washington Post reported:
"...Lobbying groups for industries as varied as high technology and hotels are clogging the reception rooms and e-mail inboxes of senior lawmakers, pressuring them to include the groups' favorite benefits in a stimulus package. Small businesses are seeking to write off new equipment faster. Large businesses are appealing for lower tax rates. And home builders are pleading to offset their taxable income in years past with the losses they are suffering today."
During President Bush's years in office, we saw major tax cuts for large corporations. Because there were no strings attached, we also saw large corporations lay off workers and send jobs overseas -- thereby helping other nations' economies while harming our own. At the same time, executives' pay and perks managed to increase.
In short, Strings-free tax breaks for large corporations don't seem to benefit our economy much. On the other hand, tax breaks for smaller businesses might succeed in pumping some money into the economy.
Still, nothing seems more effective than making sure that us ordinary American consumers have money to spend.
Among the stranger requests made by lobbyists, the Travel Industry Association wants millions for ads targeting foreign tourists (Washington Post). How would that quickly increase consumer spending in America? Trips take time to plan. And given that the U.S. dollar has declined so much since President Bush took office, don't many nation's citizens already have incentive to visit us?
The R&D Credit Coalition wants billions in tax breaks for corporate research. I'm not sure what "corporate research" is, but I suspect that it wouldn't involve funneling masses of money to consumers.
Regarding Bernanke's congressional testimony, economist Paul Krugman partly disagrees -- as explained here (complete with charts).
Other BN-Politics Posts:
* More Ripple Effects of the Housing Crisis
* Oil Prices Pass $100 Mark, Inflation Likely Ahead
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