Sunday, January 11, 2009

Missing in the Stimulus Talk

Absent from almost all the discussion about stimulating the economy is any mention of the poorest Americans and the unemployed, even though the stimulus bang for the buck is highest for food stamps (aka SNAP) and unemployment compensation and the lowest for tax cuts.

Take today's discussion on NBC's Meet the Press. Only former congressman David Bonior (D-Mich) brought up the notion that the essential problem of the American economy is the growing disparity between the rich and the rest of us.

Bonior mentioned something I have come across at least once a week for the past few years: that 90 percent of all the income gains since the last recession went to the top 10 percent of all income earners. I've mentioned this disparity before (see here).

Yet everyone else was worried about the debt, the deficit, whether infrastructure projects would happen fast enough and whether there were enough tax cuts.

Yet the most effective way to get money circulating out there is to put federal dollars into food aid and unemployment checks. Why? Because the folks who get that aid aren't going to bank the money, they'll spend it right away on necessities. That spending will get consumption back up, build confidence and generate jobs.

The infrastructure projects are great for the skilled middle class, which is fine -- we need a robust middle class. But it's slower and most low-skill, low-wage workers won't benefit.

Tax cuts don't help at all. To owe taxes you have to have income, remember? If you have income, at a time like this you'll likely bank any more money you get. That's right: it will sit in the vaults of the same banks that aren't lending to anyone any more.

See an excellent explanation of how this works here.

Yet instead of the important things that ought to be discussed, Meet the Press host David Gregory did not ask a single question about disparity or about suffering, as if the whole world was composed of comfortable Washington policy gnats like himself and his guests.
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