When the economy begins to suffer, the government has two systems to reverse the downward trend. The first is the Federal Reserve, the controller of monetary policy, which can try to revive the economy by lowering interest rates, among other steps. The second is Congress, the controller of fiscal policy. In the past few decades, Congress’ weapon of choice in fighting recession has become the so-called economic stimulus package. These packages, which usually follow cuts in key interest rates by the Federal Reserve, are a combination of tax and spending measures intended to jump-start economic activity. According to the Congressional Budget Office, “Fiscal stimulus aims to boost economic activity during periods of economic weakness by increasing short-term aggregate demand.” This means that if more people buy goods, there will be a lessened chance of falling demand. A diminished chance of falling demand means that companies will be less likely to lay off workers, avoiding increased unemployment and decreased production.
The current economic stimulus package passed quickly through Congress in a rare show of bipartisan cooperation. It will be signed by President Bush on Wednesday. The legislation seeks to stave off a recession by increasing only consumption and investment through tax rebates and business incentives. The package includes rebates of up to $600 for individuals or $1,200 for couples, plus an additional $300 for each child. Payments will be reduced for individuals with adjusted gross incomes above $75,000 per year and couples with incomes above $150,000. The wealthiest taxpayers receive nothing. Late additions to the plan by the Senate include $300 payments for about 20 million Social Security recipients and 250,000 disabled veterans who would not have qualified because they do not earn income.
The uncharacteristic speed with which Congress has passed the stimulus package has many in Washington feeling self-congratulatory. “It’s tremendous what we’ve been able to accomplish,” Senate Majority Leader Harry Reid recently remarked. Hold on a moment, Senator Reid, I’m confused. What exactly is “tremendous?” Is it that Democrats and Republicans were at last able to agree? Is it that the process did not take months of deliberation? For certainly, the stimulus package itself is anything but tremendous, as so many necessary provisions were denied. Of all the necessary amendments that were shot down, the one that promised the most instant and necessary help to those needed it most was the proposed $1 billion increase in the Low-Income Home Energy Assistance Program, known as LIHEAP, which provides subsidies for heating costs to the poorest Americans.
According to its Web site, LIHEAP offers discounts that range from 20 percent to 42 percent off the low-income customer bill. The program, which covers just 16 percent of eligible households, is important to less fortunate Americans in today’s world of $100 barrels of oil and a looming recession that has forced many low-income families to turn off their heat in order to pay their bills. Perhaps wealthier Americans should sit in their rooms and turn the thermostat down to the minimum setting. Then, maybe, we will all understand the outrage perpetrated against our poorer fellow citizens by this Congress.