Independent Student Newspaper Since 1969

The Badger Herald

Independent Student Newspaper Since 1969

The Badger Herald

Independent Student Newspaper Since 1969

The Badger Herald


Beefing up Obama’s stimulus package

Do the masters of the universe pay taxes?

The recent tax-related travails of Timothy Geithner, now treasury secretary, as well as Tom Daschle and the lesser-known Nancy Killefer lead writer Emily Yoffe to opine in The Washington Post that the IRS, in an effort to find tax delinquents, “should have every American nominated to a Cabinet post.”

If the masters of the universe can’t figure out their own taxes, can we really trust them with hundreds of billions of the hard-earned tax dollars of our future generations?


Men and women — much like the aforementioned tax delinquents — are the ones crafting the stimulus bill now being debated and considered in the Senate. Women like Rep. Nancy Pelosi and men like our very own Rep. David Obey crafted the House version. The result was a bill that too often read like a laundry list of projects and initiatives that Democrats have been unable to fund with a Republican president and a Republican majority in both houses for much of his administration.

In an effort to garner Republican support, President Obama undertook a charm offensive on Congressional Republicans. A number of controversial provisions were cut to shore up Republican support — most notably a provision that allocated hundreds of millions for contraceptive programs in states.

As House Minority Leader John Boehner, R-Ohio, quipped, “How you can spend hundreds of millions of dollars on contraceptives? How does that stimulate the economy?”

Republicans, for their part, have been boneheaded as well. Their insistence upon tax cuts as the magical elixir to cure our economy strikes me as at once hilarious and incredibly dangerous.

I’m all for a massive, targeted stimulus bill that has provisions for both spending and tax cuts to guide us out of a recession that wants very badly to be a depression. But the stimulus bill being debated in Congress is falling short on far too many fronts at this point.

Firstly, the bill being tossed around is too small. The $780 billion compromise will be spread over three years. Our economy is worth $14 trillion. Over three years, assuming no growth or contraction, that’s $42 trillion. Which means this stimulus bill amounts to less than 2 percent of our economy.

That’s like shoveling a sidewalk with a teaspoon.

Japan, in its lost decade of the 1990s, experimented with the very ideas being espoused by this stimulus plan. Trillions were spent on infrastructure and roads in an effort to spur the economy. Yet, it’s called Japan‘s lost decade for a reason.

If Japan couldn’t right its economy with trillions, what makes us think we can with billions?

Second, the Republican insistence upon tax cuts is just plain wrong in this kind of economic environment. We’ve lost 3.6 million jobs since this recession began at the end of 2007.

Businesses don’t need tax cuts; they need customers.

An unemployed worker doesn’t need a tax cut. He needs a job.

When you aren’t making any money, and you’re not getting any business, a tax cut means next to nothing. Businesses and individuals need jobs. Tax cuts create a wonderful environment for growth, but they are the equivalent of watering a plant. Jobs are the seeds. Without them, the water does little more than make mud where there once was dirt.

And one of the largest issues with tax cuts is that consumers tend to save instead of spend their tax cuts. Especially in a recession like ours, where the usual rules of saving during good times and spending those savings during bad has been upended. It’s strange, but for our economy to grow, people need to start spending money again. But this time it needs to be money they didn’t borrow.

Further, according to the Congressional Budget Office, the high estimates of the multiplier effect on GDP of government spending, government transfers to state and local governments for infrastructure, transfers to individuals and a one-year tax cut for higher income earners are 2.5, 2.5, 2.2 and .5, respectively.

If Congress really wants a bill that will have a large and positive impact on jobs, GDP and the economy in general, they’d make the bill larger. Second, instead of tax cuts that will end up in consumers’ bank accounts, Congress should spend the billions intended for tax cuts on sending American families a gift card worth thousands, as was suggested by a small business owner writing in The Washington Post. Money in such form would force consumers to spend the money on things they needed or wanted versus saving it and riding out the storm.

But, then again, if we can’t expect our leaders to figure out how to pay their taxes, why would we trust them with our $14 trillion economy?

But make no mistake: At this point, an imperfect stimulus is better than none at all.

Gerald Cox ([email protected]) is a senior majoring in economics.

Leave a Comment
Donate to The Badger Herald

Your donation will support the student journalists of University of Wisconsin-Madison. Your contribution will allow us to purchase equipment and cover our annual website hosting costs.

More to Discover
Donate to The Badger Herald

Comments (0)

All The Badger Herald Picks Reader Picks Sort: Newest

Your email address will not be published. Required fields are marked *