So how stimulating is the $818 billion economic stimulus bill the U.S. House just passed? Our answer is that the bill isn't perfect, but it looks like it will give the economy a jolt that it needs.
Can we guarantee there won't be unintended consequences? No. Look what happened with the bailout funds to the big American banks. The banks were supposed to loan the money, but they mostly have hoarded it, and there's nothing in the law that compels them to do otherwise.
But the stimulus bill is a different animal. Its $30 billion for highway construction will surely put builders to work. Ditto for the $13.1 billion for other forms of transportation, including mass transit, and the $8.4 billion for clean drinking water.
We would suggest, however, that the states use these funds to repair existing roads and bridges before they build new roads. Of course, some projects, like rebuilding I-15 through Utah County, would be a combination of the two. But we think that repairing crumbling systems is the best use of these funds.
Much of the other money in the bill is to help people who have lost their jobs. There's $89 billion for Medicaid, the health-insurance plan for the poor, and $13.3 billion of health-insurance assistance for the unemployed. That's not direct job creation, but it would help to preserve jobs in the health sector. And helping people in need is the right thing to do.
The $38 billion in emergency and extended unemployment benefits will go straight into the economy. The beneficiaries will spend that immediately for basic necessities.
Republicans in Congress, none of whom voted for the bill, are complaining that it is weighted too heavily in favor of direct spending and too lightly toward tax cuts. Based on the analysis by the Congressional Budget Office, it looks to us like about three-quarters of the funds will go to spending and about a quarter to tax relief.
The trouble with tax relief, though, is that if people and businesses use the $188 billion in tax reductions for savings or to pay down debt, to cite two examples, there's no economic stimulus. If there were a way to assure that business would use tax savings to preserve or create jobs, that could be counted as stimulus. But that would be a government intrusion into operations that many businesses would not welcome.
By contrast, direct spending on school facilities (there's $20 billion for that) or to computerize health records (another $20 billion) would preserve or create jobs.
If you've been paying attention to the Utah Legislature's wrestling match with budget cuts, you know that state programs and employment will undergo drastic reductions without federal aid. The stimulus bill includes $79 billion to help stabilize state budgets, beyond the allocations for things like infrastructure, Medicaid and schools.
Depending upon how the economy responds, this is likely to be the first shot of fiscal stimulus. For the most part, this installment makes sense. And the need is beyond question.