Stimulus Proposals Aim to Jumpstart the Economy

By Whitman, Cameron | Nation's Cities Weekly, January 6, 2003 | Go to article overview

Stimulus Proposals Aim to Jumpstart the Economy


Whitman, Cameron, Nation's Cities Weekly


As cities begin a new year, they face many economic pitfalls and warning signs ahead.

States face a second fiscal year of multi-billion dollar budget shortfalls, which will hurt cities.

The National League of Cities' survey of city finance officers shows that the municipal fiscal picture is bleak. Consumer confidence, according to the Conference Board, fell to 80.3 percent in December 2002, the sixth dip in seven months and just slightly above the nine-year low of 79.6 percent in October of 2002. Unemployment hovers around 6 percent, the job outlook worsens, energy prices are rising and the stock market continues its slump.

The thorny debate among policymakers has intensified over what actions the federal government can and should take to help jumpstart the economy to create more jobs and to generate new consumer demand.

According to author Virginia Postrel, writing for the New York Times on January 1, "Tax policy is not just an economic tool. It's a partisan weapon. And its power, whether to improve economic performance or stay political opponents depends on the details."

There are dozens of details under discussion.

Proposals range from supply-side trickle down approaches to revenue sharing, increasing and extending unemployment benefits, reducing the payroll tax, raising the minimum wage and investing in public safety and infrastructure.

Administration's 10-Year Economic Growth Plan

The Bush Administration is expected to advance a detailed proposal in early January as Congress returns to work.

The Administration is committed to tax cuts as a major tool to stimulate the economy and, in the various proposals it has discussed, these cuts would be targeted to wealthy Americans paying the highest tax rates.

President Bush believes to encourage increased investments, long-term 10-year tax cuts are indicated.

The Administration has suggested a number of ideas including:

* Making permanent the 2001 $1.35 trillion 10-year tax cut;

* Accelerating the effective dates of the cuts in the higher income tax rates;

* Eliminating the inheritance tax;

* Ending double taxation of stock dividends;

* Negotiating fast track "free trade" agreements;

* Increasing contribution limits for 401k and IRA accounts; and

* Accelerating the childcare tax credit.

The Baucus Proposal

Senator Max Baucus (D-Mont.), outgoing chair of the Senate Finance Committee, is advancing a more modest economic stimulus proposal.

Baucus' proposal is aimed at both providing an immediate economic stimulus and more long-term investments, and it focuses specifically on strengthening the economy and reducing unemployment. …

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