Economists Question the Need for Democrats' Spending plan.(NATION)(NEWS ANALYSIS)

The Washington Times (Washington, DC), October 20, 2002 | Go to article overview

Economists Question the Need for Democrats' Spending plan.(NATION)(NEWS ANALYSIS)


Byline: Donald Lambro, THE WASHINGTON TIMES

The economic stimulus plans proposed by Democratic leaders have more to do with energizing their party's political base than with spurring growth and jobs, economists and fiscal analysts said yesterday.

The five-point plans presented last week by Senate Majority Leader Tom Daschle and House Minority Leader Richard A. Gephardt called for major increases in government spending to extend unemployment benefits, raise the minimum wage and give money to low income people and to the states to pay for local infrastructure programs and health care benefits.

Mr. Gephardt's plan, which he called "pump-priming" - a term used to describe the New Deal's economic programs of the 1930s - would cost taxpayers $200 billion. But former government officials and economic analysts questioned whether either of the Democratic leaders' plans would do any good at all.

"My guess would be that the economy would be well on the way to recovery by the time these measures would be enacted into law and implemented. While some are important for equity and social policy reasons, such as extended unemployment benefits, the overall macroeconomic impact would be quite modest," said Robert Reischauer, president of the Urban Institute.

"The general consensus now is that discretionary fiscal stimulus is ineffective because it almost invariably comes too late," said Mr. Reischauer, the former director of the Congressional Budget Office.

Other business officials, economists and fiscal analysts agreed with his assessment, though some went further, saying that there was little economic evidence that such spending increases produce much, if any, new economic growth.

"It will create jobs for the public sector employees' unions who are the folks that underwrite the Democrats' political campaigns, but these plans will not get the economy going," said John Berthoud, president of the National Taxpayers Union.

"These are two politicians who are still proposing the same old stuff, more government spending, which are the prescriptions from an exhausted ideology," Mr. Berthoud said.

Bruce Josten, the U.S. Chamber of Commerce's chief lobbyist, was similarly unimpressed by the Democratic plans. …

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