Evaluating the Senate Stimulus Plan

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The Senate stimulus package released this week is a solid improvement over the House/White House compromise plan. The primary reason is that the Senate proposal, tailored by Democratic Senator Max Baucus of Montana, provides low- and moderate-income working families with rebates that are the same size as the rebates going to families at higher income levels. The House package gave low- and moderate-income families smaller rebates than their wealthier counterparts.

Senator Baucus also raised the ceiling on the rebates. Whereas the House plan capped eligibility for the full rebate at $75,000 for individuals and $150,000 for couples, Baucus puts the caps at $150,000 for individuals and $300,000 for couples. The rebates themselves are slightly smaller, however. The House plan gave individuals a maximum of $600 and couples a maximum of $1,200. The Senate rebates max out at $500 and $1,000.

According to the Center on Budget and Policy Priorities:

Under the House bill, a mother with one child who works full time at the minimum wage would receive a rebate of $600, while a mother with one child and an income of $75,000 would receive a rebate of $900, and a married couple with no children and an income of $150,000 would get $1,200. The Finance Committee proposal [pushed by Baucus, the Senate Finance Committee Chair] would reduce or eliminate these disparities.

Another comparison is a little less flattering to the Senate plan. Under the House plan, a couple making a very comfortable $250,000 a year doesn’t get a rebate. Under the Senate version, the couple gets the full rebate of $1,000. Giving the rich rebates is generally considered ineffective stimulus, because they are unlikely to immediately spend the of money given back to them (thus not pumping money into the economy, the purpose of any stimulus plan).

The Senate plan inserts another provision that is particularly progressive. It extends unemployment insurance for 13 weeks for jobless Americans who have exhausted their regular unemployment benefits. And job seekers who live in states with very high unemployment would get an extra 13 on top of that, for a total of 26 additional weeks.

Extending unemployment benefits is considered a key method of economic stimulus, because dollars given to the unemployed are likely to be spent immediately on necessities.

According to the CBPP, America’s unemployed need help:

In January 2008, the overall unemployment rate was 4.9 percent, and the percentage of all unemployed workers who had been unemployed for 27 weeks or more was 18.3 percent. At the start of the last recession in March 2001, by contrast, the unemployment rate was 4.3 percent and the percentage of the unemployed who had been out of work for at least 27 weeks was 11.1 percent.


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