Benefits Will Jump Start Economic Recovery

The Coalition on Human Needs has done us all a great service. It has issued a summary of the provisions in the House economic recovery package that will benefit low-income people and others at immediate risk of hardship. Anyone who’s tried to read the legislation–or even the Appropriations Committee’s summary–knows how useful this is.

CHN also identifies shortcomings in the package, including the short shrift given to affordable housing. No funding for additional housing vouchers, despite the rising tide of homelessness. No funding to support the construction of new affordable housing, despite the job creation potential. To me, these are glaring gaps.

However, CHN’s most important message is that the provisions targeted to low-income people and laid-off workers will do more than alleviate hardship. Combined with proposed increases for K-12 education programs, they will save or create nearly two million jobs.

This is because they will quickly put money into the hands of people who will spend it to meet their needs. Mark Zandi, chief economist for Moody’s Economy.com has translated this obvious truth into dollars and cents. He says, for example, that a $1.00 increase in food stamps will generate an estimated $1.73 in near-term economic growth.

The Economic Policy Institute has crunched the numbers another way. Its analysis for CHN shows that the food stamp provisions in the House package will save or create about 185,000 jobs. Think grocery store clerks, drivers for distribution companies, workers in food processing plants, etc.

Experts, including Zandi and the Congressional Budget Office, say that tax cuts are a less effective economic stimulus. CBO is particularly unenthusiastic about reductions in the corporate tax rate. As it says, businesses will not spend more money on labor or produce more just because they have more after-tax income. They need increased consumer demand. And that’s what the proposed food stamps increase and other measures targeted to low-income people will deliver.

Nevertheless, Congressional Republicans want less spending and more tax relief in the economic recovery package. And on the House side, they clearly won’t budge. Not a single Republican voted in favor of the package the House passed yesterday.

Now, there’s a reasonable argument to be made for paring down the spending part to focus it more on jump starting the economy and perhaps also for expanding the tax part. But substituting tax relief for the major measures CHN endorses should be a non-starter. Fortunately, it looks as if it will be.

2 Responses to Benefits Will Jump Start Economic Recovery

  1. […] stamps and unemployment insurance (and, remarkably, an unprecedented amount for education). The Poverty and Policy Blog points to the Coalition on Human Needs’ summary review of the stimulus package. The gist is: […]

  2. […] stamps and unemployment insurance (and, remarkably, an unprecedented amount for education). The Poverty and Policy Blog points to the Coalition on Human Needs’ summary review of the stimulus package. The gist is: […]

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