The stimulus package President Bush and House leaders concocted on Thursday is better than the President's proposed package but has left some economists wanting more.
If you don't know the outlines of the plan, here they are. The plan gives individual tax filers up to $600 back in the form of a tax rebate and gives couples up to $1,200, with an additional $300 per child. The plan also includes tax cuts for businesses. The total value is $150 billion.
Democrats agreed to the plan because it doesn't make the Bush tax cuts for the wealthy permanent and because the tax filers eligible for the full rebate are capped by income at $75,000 (filers lose 5 percent for every $1,000 in income above that amount). The White House agreed to the plan because it didn't include any additional unemployment benefits or an increase to the food stamp program, which President Bush called "unnecessary spending projects." There were plaudits all around.
But for all the self-satisfied back-slapping in Washington, outside observers were somewhat ambivalent. Conservatives wanted deeper tax cuts, and liberals were underwhelmed by the package's relief for the poor.
"Useful, but flawed and probably not enough," said a New York Times analysis, citing economists who criticized the plan because it will not act fast enough: rebates checks will not be mailed until May at the earliest. The rejected increases in unemployment benefits and food stamps would provide more immediate help (and—bonus!—would target those most in need). Robert Greenstein, executive director of the Center on Budget and Policy Priorities pointed to Congressional Budget Office numbers showing that unemployment insurance and food stamp provisions would inject "more purchasing power into the economy within one to two months." He also predicted the corporate tax cuts in the plan, similar to those found in past packages, would have "only modest stimulative effects."
Greenstein did praise the package for not leaving millions of low- and moderate-income Americans unaided, as the White House's original plan would have done.
Lawrence Mishel, president of the Economic Policy Institute, called the roughly $50 billion in aid for businesses "scandalous," saying, "It is common sense and established economics that businesses invest and hire when they have customers—not when they get subsidies for equipment to make things they can't sell."
The Senate plans on taking a long look at the House/White House plan and then making adjustments as the Senators see fit, so some of the criticisms may be dealt with. Others, though, could arise. The final details matter: billions of dollars are at stake. But what both Democrats and Republicans are counting on is that whatever specifics end up in the final package, as unsatisfying as they may be, will be enough to satisfy the number one customer: those jittery markets across the world.
Update: Krugman weighs in here. He's not impressed.