Stimulus Standards

Posted Feb. 03, 2009, at 5:37 p.m.

As the Senate continues work on a massive stimulus package, Maine Sens. Olympia Snowe and Susan Collins, Republicans whose votes will likely tip the balance toward or against the bill, have set the right standard for the legislation: its components must stimulate the economy, not merely be worthwhile spending proposals.

That means that funding for infrastructure projects, unemployment benefits and Medicaid insurance should stay in the bill, while proposals to spend money on converter boxes for digital television, sexually transmitted disease prevention and wildfire management, which are worthwhile and should be debated later, should not. Encouraging infrastructure work that is energy-efficient and environmentally friendly is legitimate, earmarking money for alternative energy projects that are years from productions is not.

“We must not confuse stimulus with omnibus,” Sen. Snowe said on the Senate floor Monday, referring to the massive spending bills that Congress uses to fund the federal government.

“We have a responsibility — an obligation — to apply a rigorous standard to determine whether this approach will help extricate our nation from this crisis. There are no do-overs,” she continued.

That rigorous standard must also apply to the tax provisions in the bill. A group of Republican senators, led by Florida Sen. Mel Martinez, put together an alternative that would put more money toward tax cuts. The $713 billion plan includes $430 billion in tax cuts, but only $250 billion for infra-structure projects and extending unemployment insurance and food stamps.

Analysis by prominent economists shows that investing in infrastructure and increasing unemployment and food stamp benefits are much more effective at stimulating the economy than tax breaks. A fundamental problem with the economy is that Americans aren’t buying enough. A stimulus pack-age must put money into the hands of people who are must likely to spend it. Increasing benefits and creating jobs through infrastructure investments does this.

The inclusion of $30 billion to address the housing crisis in Sen. Martinez’s alternative is worthy of further consideration as foreclosure, falling home prices and scarce home loans have dampened the economy.

Sen. Collins, too, is looking for a smaller, more targeted package than the $819 billion measure passed by the House last week. “A lot of these programs are worthwhile,” she told CNN last weekend. “But we have to focus on what the impact is on the economy and whether or not the spending creates or saves jobs.”

“That’s the test that needs to be passed,” she concluded.

With these standards, Sens. Snowe and Collins will play central roles in ensuring a needed stimulus package becomes reality without it becoming an excuse for billions of dollars in federal spending that may be for worthwhile projects but that won’t create jobs or boost consumer spending now.

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