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Two Economic Stimulus Packages up for Debate in the Senate

Debate and an expected vote this week are expected in the Senate for two competing economic stimulus legislation packages.  There are substantial fiscal policy differences between them, even though both plans are intended to improve the incentives to work, save, and invest and to ease the impact of the economic recession.

One plan proposed by Senator Charles Grassley (Republican-Iowa) is strongly supported by President Bush and is similar to the Economic Security and Recovery Act of 2001 (H.R. 3090 – To view bill, visit http://thomas.loc.gov/cgi-bin/bdquery/z?d107:h.r.03090:) which narrowly passed the House.  (To view how your representative voted, visit http://clerkweb.house.gov/cgi-bin/vote.exe?year=2001&rollnumber=404)  To stimulate economic performance, this measure relies primarily on modifications in the tax rates, labor and capital.  It will provide incentives for business owners and employees, stimulate employment growth and generate higher incomes that result in consumer spending and greater investment (the real catalysts of economic growth) by reducing tax rates thus reducing the tax burden on investment and capital assets.

The second plan, also designed to stimulate economic activity, is the Daschle proposal (Summary of Economic Stimulus and Assistance for American Workers Act of 2001 – To view bill, visit http://finance.senate.gov/sitepages/legislation.htm) which contains a two-component economic stimulus package combining the plans of Senators Max Baucus (Democrat – Montana) and Robert Byrd (Democrat – West Virginia).  This measure relies on cash transfer to distressed businesses and displaced workers.

The expected economic outcomes fall short of those expected under the Grassley plan.  The rationale and logic of the plan is questioned because of the utilization of increased government spending as the primary tool to stimulate economic activity, although both plans transfer income to low and moderate income taxpayers through rebates and both assist the unemployed.  The Republican plan however relies less on government spending than the Democratic plan.

Unfortunately, to win specific support from other senators, the Daschle plan includes provisions less obviously connected to stimulating the economy.  For example, bonding for Amtrak to develop high-speed railroads and for a new New York-New Jersey tunnel is included in this bill which was a last minute concession to Senator Robert Torricelli (Democrat – New Jersey).  Also, to help shore up support of farm state members, more than $5 billion in agriculture subsidies were provided by the measure.  At the request of Senator John D. Rockefeller (Democrat – West Virginia), a tax credit expanding Internet access in rural areas was included.  In commodities that have experienced low prices during the 2000-2001 crop years, subsidiaries are included for bison meat, eggplant, cauliflower, and pumpkin growers.

As is often the case with competing legislation in Washington, the Grassley plan contains several special interest provisions although it has far less than the Daschle plan. 

Although not perfect and not able to provide immediate economic stimulus as the economy currently needs, the Grassley bill when compared to the Daschle measure over the next five years will provide far more incentive for business to create new jobs, while encouraging families to spend more and save as it tries to control significant government spending.

To learn how you can become involved, visit http://www.americanvoiceinstitute.org/Stimulus Packages Action Alerts.htm

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