US stimulus may be too late, despite swift action: analysts
WASHINGTON: A surprisingly swift bipartisan effort in Congress is likely to deliver a stimulus package soon, but analysts say even that may not prevent a downturn in the world’s biggest economy.
The White House and congressional leaders struck a deal Thursday on a quickly crafted stimulus plan of an estimated $150 billion just days after President George W. Bush called for a growth package in the face of a rapidly deteriorating economic backdrop.
The deal with House of Representatives leaders and the Republican administration sets the stage for likely action. But talks were still ongoing with the Senate, where leaders predicted a bill might be sent to the White House by February 15.
US Treasury Secretary Henry Paulson said the plan would allow the government to mail out tax rebate checks aimed at stimulating consumer spending within “60 days, more or less” of congressional passage.
“We’re going to move very quickly,” he added.
Yet some observers said it might take the government until May or June to get checks to consumers, making the economic boost somewhat questionable.
Bush urged lawmakers to act without delay in the face of what appears to be a rapidly deteriorating economic backdrop that has sent stock markets around the world into near panic.
“Because the country needs this boost to the economy now, I urge the House and the Senate to enact this economic growth agreement into law as soon as possible,” Bush said after the agreement with House leaders was announced.
Peter Morici, economist at the University of Maryland, said the package was positive for a struggling economy but might not avert recession.
“Putting cash in people’s hands is the best kind of stimulus,” Morici said.
“It’s a good thing, but it’s not enough to head off recession. We’re talking about $150 billion, so this roughly offsets what the banks have lost” in soured housing investments.
Morici said the stimulus plan “may make (a recession) more shallow, but the economy will slow down.”
Lawrence Mishel of the Economic Policy Institute said the plan “gets it half right by providing broad-based payments to individual workers and for children,” but that the impact may be too late to help families in crisis.
“We need policies that will mitigate the rise of unemployment,” he said. “This package won’t have an effect until several months.”
Congressional officials said tax-rebate checks would be mailed out in the coming weeks to 117 million families under the plan. Most single taxpayers would get up to 600 dollars and married couples up to 1,200 dollars, plus 300 dollars per child.
Certain low-income persons who earn below the threshold for paying taxes would also get a rebate of at least $300 under the plan. Congressional officials said the provision would help 35 million working families.
The deal was still being debated in the Senate, where leaders said a plan may be brought up in committee next week.
“I look forward to this proposal’s quick passage in the House so that the Senate can debate these provisions soon and meet my goal of sending the president a package by the Presidents’ Day recess” around February 15, Senate Democratic Leader Harry Reid said.
But Reid said he expected senators to add funds for “other initiatives that can boost the economy immediately, such as unemployment benefits, nutrition assistance, state relief and infrastructure investment.”
Any new provisions could delay passage since an identical bill must win passage in both chambers.
Criticism of the plan came from Rea Hederman, an analyst at the conservative Heritage Foundation, who said the plan offers little real stimulus other than providing business incentives. “Tax rebates and similar cash transfers don’t stimulate the economy,” he said.
“The federal government cannot just wish new purchasing power into existence. The government must borrow the funds for the rebates, which means either less money available for investment or an increase in the trade deficit.” afp