Economic Stimulus Package Action Alert -- Nov. 7, 2001

A summary of the House action on an economic stimulus package up through November 7, 2001. Also contains talking points to help with calls or letters to Congressional members. An abridged version of this alert, with contact information and talking points, is available from OMB Watch's Activist Central Alert Page. Economic Stimulus Package Background In the days after the attacks on New York and the Pentagon, House Ways and Means Chair Bill Thomas (R-CA) began suggesting that various permanent corporate tax cuts be included in any legislative measures devised to stimulate the economy. At the same time, Rep. Ben Cardin (D-MD) was warning against any proposals, permanent or otherwise, that would come in the guise of economic stimulus without actually accomplishing it. There was broad support around the need for an economic stimulus in light of the economic slowdown and its worsening as a result of the attacks. In October, the Senate and House Budget Committee Chairs and Ranking Members, underscoring the importance of an economic stimulus package, issued a joint statement of principles to guide the construction of such a package. In it, Congressional budget leaders stated that "long-term fiscal discipline is essential to sustained economic growth" and that any stimulus package "should restore consumer and business confidence, increase employment and investment and help those most vulnerable in an economic downturn." Moreover, they all agreed that the effects of a stimulus package should be felt within 6 months of passage and that all components should expire within one year, if at all possible. Finally, they declared that the package should be directed at individuals most likely to spend the additional income and businesses most likely to increase investment and employment. This was a bipartisan agreement, focused on creating a stimulus package that would be effective. In a speech given two weeks later, Office of Management and Budget (OMB) Director Mitch Daniels outlined the President's criteria for a successful economic stimulus package: an economic stimulus package must be limited in size, economic impact and duration, should not be limited to any particular industry, and should be made up nearly entirely of tax cuts - to balance the $40 billion emergency spending already legislated. We now continue to move farther and farther away from agreement on an economic stimulus package or any kind of bipartisan consensus, even while the economic situation worsens by the day. In late October, the House created and passed H.R. 3090, named the "Economic Security and Recovery Act of 2001," costing $99.5 billion in 2002 and $159 billion over ten years, even though it violates all of the principles its own Budget Committee leaders had provided for economic recovery. The President issued a statement lending his "strong support" to the package, although it was widely thought that the President expected considerable changes to any final bill passed by Congress. Now it's the Senate's turn. After much negotiating among members of the Senate Finance Committee over the last week, it now seems that they are ready to complete work on a stimulus package and vote on it tomorrow, November 8. The proposal they will vote on was prepared by Committee Chair Max Baucus (D-MT), and is similar to the proposal he outlined two weeks ago. The Baucus plan, "The Economic Recovery and Assistance for American Workers Act of 2001," was released yesterday and, according to Senate Finance Committee's calculations, would cost $67 billion in FY 2002 and $45 billion over the next 10 years (actually increasing revenue in the later years). In keeping all provisions temporary, providing low-cost tax reductions to spur corporate purchases, and directing more than $30 billion in extended unemployment insurance and COBRA health insurance benefits to laid-off, low-income workers, the Baucus plan comes closest to adhering to the guiding principles provided by the House and Senate Budget Committees. Like the House-passed bill, this proposal also includes approximately $14 billion to provide tax rebates to those 35 million Americans who did not receive Bush's tax cut passed in June. In addition, this package provides a temporary increase in the amount of federal funds that go to each state for Medicaid to help ease the budget crises many states are now facing. Baucus also added $2 billion for FY 2002 tax credits to businesses located in qualified areas of New York City to spur investment and hiring in those business districts most impacted by the September 11 attacks. Finally, there is also $6 billion in agricultural relief included in this package. Though it seems likely now that it will be the Baucus package the Senate uses as its starting point for further debate, there is also another Republican-backed proposal, put forth by the Finance Committee's Ranking Member, Charles Grassley (R-IA). Grassley's proposal, according to his calculations, would cost $91 billion in FY 2002 and $175 billion over 10 years. The main elements of his plan, which basically incorporates the President's proposals, include an acceleration of the June tax cut's upper-income tax bracket reductions, a permanent repeal of the corporate AMT, and an increased depreciation in the value of business equipment. It also includes a very limited extension of unemployment benefits to people who directly lost their jobs as a result of the September 11 attacks and States that meet specific criteria, and a mere $3 billion to States to assist them in extending health care coverage to the unemployed. Although the Grassley plan does provide approximately $14 billion for one-time tax rebates to those low-income individuals who did not receive them the first time, more than 80% of the total cost of this proposal is rooted in permanent tax cuts - most notably for those in the upper-income tax brackets. Like the House-passed plan, the Senate Republican plan also seems less inclined toward providing an economic stimulus to the country than in furthering tax cuts and a legislative agenda that predates the September 11 tragedy. This comes in the face of new evidence that the economic downturn is severe-with unemployment at 5.4% in October, higher than in five years, and the total number of jobs lost in October the largest job loss in 20 years. As noted, all of the proposals include approximately $14 million to provide tax rebates to those 35 million Americans who did not receive Bush's tax cut passed in June, however, there will now not be enough time for these checks to reach low-income families for the holidays -- thus missing an ideal opportunity for providing a jump in consumer spending. The IRS has set mid-November as the absolute deadline by which a stimulus package must be signed in order for tax rebate checks to reach families by the end of this year. Right now, things are in flux. It has been reported that Sens. Jim Jeffords (I-VT) and John Breaux (D-LA), who will vote for the Baucus plan in the Finance Committee (without their support, the Baucus bill will not have the votes to be approved by the Senate Finance Committee), remain uncommitted to it and will want to see more of a compromise between the Baucus and Grassley proposals before voting for it in the final vote on the Senate floor. For instance, instead of a direct subsidy to assist the unemployed with health insurance expense under COBRA, they support a tax credit; instead of a 30% depreciation bonus as proposed in the Grassley bill or the 10% bonus in the Baucus bill, they want a 20% depreciation bonus. The time frame for action on the stimulus bill is still extremely uncertain (it seems likely that it will be considered in the Senate Finance Committee on November 8, and Senate Majority Leader Tom Daschle (D-SD) wants it ready for Senate floor debate for the week of November 12, but it is still possible that negotiations between Senate leaders and the Administration may be required before legislative action can occur). Where can we go from here? First, we all must make it clear to the Senate and the Bush Administration that we cannot afford -- and see no use in -- any more tax cuts for the top 1% of the country, and we do not want our tax dollars to be given out to the 13 largest corporations in America with no guarantee that it will actually lead to increased employment and economic security and recovery. (For more information, see the Citizens for Tax Justice analysis.) A huge tax cut was already passed this summer, and creating more tax reductions directed at the people who need them the least and are the least likely to infuse money into the economy, is the wrong thing to do-reducing the revenue available for other national priorities without providing any stimulus. A recent Democracy Corps analysis of last week's national polls reports that, "Americans are eager to invest in our country's recovery efforts, homeland security, infrastructure, health care, and long-term financial security, and have shown they will not support a tax cut effort that endangers those goals." In addition, many economists believe that many of the proposed tax cuts, like eliminating the corporate alternative minimum tax or reducing capital gains taxes, will do nothing to stimulate the economy. It is very important that we communicate this to members in Congress and the President. Otherwise, we will be left with a "stimulus" package that fails to jump start the economy and meet the needs of Americans suffering from the economic slowdown and the effects of the September 11 attacks, and does little more than provide costly and economically impotent tax cuts for the wealthiest 1% of Americans and the largest corporations. We should give our support to stimulus provisions that would adhere to the initial principles, provisions that will take effect immediately, whose costs would be limited to the duration of the economic downturn, and which would be directed at those individuals and businesses who are most likely to spend them right away. There are many possibilities. For instance:
  • An extension of unemployment benefits and an expansion of health insurance benefits for the unemployed to help families weather the current run of layoffs -- when families no longer have to make choices between food, health care premiums, and other monthly expenditures, they and the economy can be healthier. (For more on this proposal, see the Center on Budget and Policy Priorities' (CBPP) analysis and the National Partnership for Women and Families.) As the economy improves and unemployment drops, the cost for these kinds of measures will automatically be reduced, so not worsening the long-term fiscal picture.
  • A tax rebate for low-income families -- though families whose wage-earners have been laid off will need more assistance than a one-time check, this rebate check directed towards low-income families, could provide a relatively quick infusion into the economy. (See the Economic Policy Institute's (EPI) Economic Stimulus Package recommendations for more on this proposal.)
  • Increased federal assistance to state Medicaid funds, which would enable states to avoid turning away thousands of low-income children and their families from needed Medical care. Such a measure, by helping with state Medicaid budget crises, would also allow states to continue providing other widely-supported services and programs, that are especially important after the 9/11 attacks and in a slow economy. (See CBPP's analysis, the National Partnership for Women and Families and the National Governors Association (NGA)letter to Congress for more on this idea.)
  • Increased federal assistance to states, many of which are having their own budget problems, to insure that cuts in programs and services do not occur. These could be structured along the lines of revenue sharing programs or block grants and could also be time-limited. (For the details of such a proposal, see the NGA's economic stimulus and AFSCME's "Recommendations for State and Local Stimulus".)
  • An increase in expensing and acceleration of depreciation schedules to encourage businesses to make purchases now - when the economy needs it. This can be a temporary measure. There are some business-related provisions that could help the economy, although permanent and, especially, retroactive elimination of the corporate Alternative Minimum Tax or cuts in capital gains taxes, as passed in the House bill, will not.
  • Increased investment in our public health system. The recent anthrax scares have revealed how vital a strong and readied public health network is to our national well-being, and how lacking our public health care system is. A well-funded, well-staffed public health system is also economically sound as the health care industry is one of the top providers of jobs around the country.
  • School construction to address existing building needs and create jobs in cities around the country and improve our educational system - for every $1 billion spent in school construction, more than 23,000 jobs are created. (For more on this proposal see the National Education Association website.)
  • Energy-efficient homes and automobiles eliminate unnecessary dependence on oil, provide a clean environment and can create thousands of jobs. For example, $1 billion invested in infrastructure to purify and drinking water and treat wastewater can generate 40,000 jobs. (For more, see the Sierra Club statement.)
  • Expanded rail infrastructure around the country would create jobs and provide an alternative to already over-crowded airplanes. (See EPI's analysis for more on this suggestion.)
These are just a few of the many avenues for investment at the state and federal levels, which could steer the country out of this economic slowdown and help shore up domestic security. There are many others. The primary message should be that we don't want tax cuts that benefit corporations and the wealthy and don't help the economy. The time frame for action on the stimulus bill is uncertain, so please call your Senators and the President today to tell them to:
  1. Stick to the principles agreed upon by the House and Senate Budget Committee leaders - these are sound policies that will create the most stimulus at the least cost. They include spending and tax measures that:
    • Go into effect immediately and expire within a year
    • Do not have a long-term, negative impact on the federal budget
    • Restore consumer and business confidence
    • Increase employment and investment
    • Help those most vulnerable in the current economic slowdown
    • Are directed at those individuals and businesses most likely to spend the extra funds right away.
  2. Support economic stimulus measures that will benefit the economy, help the Americans who have been most hurt by the downturn, and contribute to America's priorities at this difficult time - you can name the ones that you think are most important - over any more tax cuts for those who need them, and will spend them, least.
Call, e-mail or fax your Senators, members of the Senate Finance Committee, and the President:
  • Contact information for your Senators and Representatives is available through OMB Watch's Activist Central service.
  • The list of Senate Finance Committee members can be found at the end of this page and their contact information is available through this alert.
  • You can reach the President at (202) 456-1414, by e-mail at, and by fax at (202) 456-2461. (Given the current state of affairs in Washington, DC, it is best not to send letters by post.)
Senate Finance Committee Members: DEMOCRATS:
  • Max Baucus (MT)
  • John D. Rockefeller, IV (WV)
  • Tom Daschle (SD)
  • John Breaux (LA)
  • Kent Conrad (ND)
  • Bob Graham (FL)
  • Jeff Bingaman (NM)
  • John Kerry (MA)
  • Robert Torricelli (NJ)
  • Blanche Lincoln (AR)
  • Jim Jeffords (VT)
  • Charles Grassley (IA)
  • Orrin Hatch (UT)
  • Frank Murkowski (AK)
  • Don Nickles (OK)
  • Phil Gramm (TX)
  • Trent Lott (MS)
  • Fred Thompson (TN)
  • Olympia Snowe (ME)
  • Jon Kyl (AZ)
  • Craig Thomas (WY)
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