Economic stimulus package not needed

Posted: Wednesday, December 12, 2001

Every day that the stimulus package now stalled in Congress doesn't pass makes it less urgent that it ever pass.

Recessions last an average of 11 months. The country fell into a slump in March, the official recession-certifying panel proclaimed last week. Already, eight months have gone by.

Any more delay, and Congress will be giving a flu shot to a patient getting out of bed to return to work.

Six weeks ago, the House of Representatives passed a bill by the thinnest of margins, essentially the same few votes by which Republicans control that body. Stuffed with tax cuts for corporations, the bill's enactment would be worse than doing nothing.

The Senate has rejected it. But Republicans and Democrats are so divided that they have had trouble reaching a compromise on the process by which they are going to reach a compromise.

In the meantime, economic news has run hot and cold. Revised figures for the July-September quarter indicated a shrinkage of 1.1 percent, instead of the preliminary 0.4

percent, in the nation's economy, the worst performance in a decade.

On the other hand, consumer spending has held up relatively well, especially on car sales. Stocks have rebounded from their post-Sept. 11 lows.

The federal government need not force feed the economy a high-calorie feast. How about, instead, some basic nourishment for those in need of it?

Extended unemployment benefits would provide money to those who are likely to spend it promptly. The same logic applies to tax cuts for low- and middle-income households.

Allowing businesses to write off new equipment more quickly would aim the assistance at activities that increase employment or production, rather than just throwing money at corporations as a general tax cut would do.

Federal assistance for ailing state budgets, in such programs as Medicaid, would flow to the working poor.

Whatever Washington does, it must not lose sight of the deteriorating long-term budget outlook.

A year ago, the projections for the next four years estimated a surplus of $1.35 trillion. Now the estimate is for a deficit every year through 2004.

The economic downturn and the war on terrorism are forces beyond the direct control of government. But at least one of the wounds to the budget is self-inflicted: the ill-advised tax cut passed earlier this year. Its effect is largely yet to come, meaning there is time to reconsider, if Congress can find the resolve to face the economic facts.

-- San Jose Mercury News

Dec. 4

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