Bush Stimulus Plan Would Create More Jobs, Says Heritage Foundation
July 7, 2008 - 8:28 PM
(CNSNews.com) - A Heritage Foundation study finds that the Bush economic stimulus plan, which calls for tax cuts and limited government spending, would create more jobs and do more to revive the American economy than the plan submitted by Senate Democratic Leader Tom Daschle (D-S.D.).
Daschle's plan calls for government spending increases with limited and targeted tax cuts.
Sen. Charles Grassley (R-Iowa) is proposing the Bush plan in the Senate so the Heritage study refers to it as the "Bush-Grassley plan."
The Bush-Grassley plan consists of five elements: individual income tax reductions, tax policy changes that reduce capital costs, cash relief to low and middle income workers, extending and expanding unemployment insurance and expanding health insurance coverage.
Specifically, the Bush-Grassley plan would accelerate the tax rate reductions currently scheduled for 2004 and 2006 and make them effective next year; repeal the corporate alternative minimum tax; provide supplemental cash payments to taxpayers who were not qualified to receive the full amount of last summer's rebates. Under this last scenario, single taxpayers would receive $300, married taxpayers would get $600 and the head of a household would receive $500.
The Daschle plan consists of these five elements: cash relief to low and middle income workers, tax policy changes that reduce capital costs, extending and expanding unemployment insurance, expanding health insurance coverage, and significantly increase spending for infrastructure and national security projects.
The Daschle plan calls for supplemental tax rebate checks for taxpayers who did not receive the full amount last summer, a 10 percent "bonus" depreciation for investment in capital and software placed in service over the next 12 months, extension of expiring tax credits plus a temporary extension and expansion of Unemployment Insurance. It also calls for spending increases for agriculture, highway projects, border security, and state and local anti-terrorism grants.
The Heritage report found that the Daschle plan would reduce federal tax revenue and increase spending by a total of $88 billion over the next five years. Under the Bush-Grassley plan, revenues would remain about the same and spending increases would total $248 billion over the next five years, the report said.
Both plans, according to Heritage, affect economic activity, but the Bush-Grassley plan would produce nearly twice as many jobs as the Daschle plan. Heritage bases this on calculations from their own economists and the Center for Data Analysis.
The Bush-Grassley plan would increase disposable income for a family of four by $1,176 a year while the Daschle plan would increase it by $844, according to the report.
Heritage reported that the Bush-Grassley approach is a supply side plan that lowers tax rates and the tax burden on investment and capital assets while providing incentives for business owners and workers, thus producing more jobs and higher incomes, which translate into greater investment and consumer spending.
The Daschle plan relies primarily on cash transfers to displaced workers and distressed businesses to stimulate economic activity, the report stated.
"While this plan produces some increase in employment and income and is better than doing nothing, it fails to substantially increase the fundamental incentives for stronger economic activity," the study said. "The Daschle plan never creates a large consumer response that produces job and income increases like the Bush-Grassley plan does."
Vice President Richard Cheney praised the Heritage Foundation study during a speech Wednesday before the U.S. Chamber of Commerce in Washington and urged the Senate to pass the Bush-Grassley package.
Cheney believes tax cuts of up to $75 billion would spur consumer spending and encourage businesses to create thousands of jobs.
"Tax relief works. It is absolutely essential to get on with moving a stimulus plan now," the vice president said.
The Senate resumed debate Wednesday on the Daschle plan. The House last month passed an economic package that consisted mainly of tax cuts.
Senate insiders say neither the Republicans nor the Democrats currently have enough votes to pass either the Bush-Grassley plan or the Daschle plan.
More than 80 House Republicans have signed a letter to Daschle urging him to reconsider the comments he made on Oct. 27, in which the Senate majority leader said the economic stimulus bill was "not as front burner" an issue as other legislation.
House Minority Leader Richard Gephardt (D-Mo.) said after last week's Democratic gubernatorial victories in New Jersey and Virginia that he believes Democrats are on the right track.
"The traditional Republican message of tax cuts and cultural issues is probably not resonating right now," Gephardt said. "People are focused on the economic security issues. They're worried about their own jobs. They're worried about unemployment. They're worried about health insurance."