The Trickle-Up Fix

When it comes to the economy, there is near unanimous agreement across the political spectrum that we are in trouble. While there is disagreement about whether we're in a recession, heading there, or only temporarily stuck in the sub-prime mud, the overwhelming consensus is that things have gone south. Proof of this could be found earlier in the week, when congressional leaders met with president Bush and uttered words seldom heard over the past six years, "We all agree."

This brief partisan detente comes in the form of a stimulus package which promises to put $800 of monopoly money in the average citizen's pocked in the form of a tax rebate. Consumers will then rush out en masse, hit the stores and spend, spend, spend our way out of this mess. Call this theory Trickle Up Economics. Spending means business profits and dividends, which eventually may translate into re-investment and job creation.

Just to be sure we nip this little problem in the bud, the president has thrown in some Trickle Down welfare, too. Business also gets the added bonus of its own tax breaks, double dipping, as it were. One scoop from the increased demand on its products that consumers will account for, and another direct from the Government kitty. Happy days are here again! It's as good as done. We should all start feeling the medication kicking in around three months from now.

OK, that's the short-term plan. Perhaps more important is to look ahead: Which candidate is best equipped to deal with the economy going forward?

The current Democratic contenders for the White House all seem to favor stimulus, and agree that the relief should go primarily to individuals rather than corporations. All are quick to point out that the one-time giveaway wouldn't be necessary in the first place, if only we hadn't elected George W. Bush president.

Hillary Clinton is a big fan of stimulus. In fact, she has proposed her own targeted tax breaks, but stresses she's aiming at a different strata of the population that the current president:

"As we look at what's happening int the economy, it's very important to recognize how the policies of the last seven years have contributed."

Barack Obama also had a plan before George Bush summoned Congressional leaders to his chambers. But he wants you to understand it's not his fault that we need one:

"...[Bush is] a president who's done more to contribute to this country's widening inequality than anyone since Herbert Hoover, a president whose tax breaks for wealthy Americans who didn't need them and didn't ask for them have only encouraged the mind-set in Washington and on Wall Street that 'what's good for me is good enough.'"

John Edwards has talked stimulus for a while now. His plan favors spending on job training and investing clean energy more than doling out cash payments. Of late, however, he seems to have warmed to the fuel injection approach, if, that is, it is done properly:

"We should not compromise with George Bush, who just wants more tax cuts for corporations. Congress ought to send him the right stimulus bill and dare him to veto it."

As for the Republican hopefuls, the overriding sentiment hasn't really changed much, and is, like the Democrats, eerily uniform. In a nutshell, the GOP answer seems to be to cut corporate as well as personal income taxes.

John McCain will grudgingly support Bush's plan, but would also cut the corporate tax rate and make the Bush tax cuts permanent.

"Do I think it's the best measure? No, but I think we all work on consensus and Democrats and Republicans working together so I won't object to it."

Mitt Romney thinks the stimulus is necessary, but is quick to add that the long-term answer is lower taxes, especially the corporate variety:

"I think what we should do is take action both of a short-term stimulative nature, but primarily, our action should be to pull forward some of the long-term growth objectives that we had, such as lowering the corporate income tax rate."

Rudy Giuliani also favors permanent tax cuts, but will go with Bush's plan so long as it's corporate give-aways are not watered down.

"I would like to see it more on the side of permanent relief meaning extending the Bush tax cuts (and) reducing the corporate tax... if we can get some control over that and have a stimulus package that puts a lot of emphasis on permanent change I think that's the best way to handle it."

Mike Huckabee says ditto to all of that. Never met a tax he liked.

Ron Paul, ever the thorn in the Republican side, stays true to his Libertarian beliefs and is against corporate welfare, but would slash taxes on things like Social Security. Oh yeah, he'd also abolish the FED.


New York Mayor Mike Bloomberg, with his Cheshire Cat, billionaire grin, isn't having any of this stimulus nonsense. The way he sees it, all this talk about cash giveaways is just a way to pander for votes.

"We can't borrow our way out of this problem. The jig is up. It's time to start getting our house in order once and for all, which I believe starts with a simple idea: making decisions based on the business cycle instead of the election calendar."

Perhaps the stimulus package is a necessary evil, but make no mistake about it, the plan has risks. After the iPods are all bought-up, the move will increase our budget deficit by an estimated 100 billion dollars. Never in our history, save for the first round of Bush cuts, have we fought a war while slashing taxes. As for the Republican limbo game concerning corporate tax rates, there may be an argument that we have to make America a place where companies want to stay. It seems a tad counter-intuitive to give people checks for $800 so that they can go out and buy products made in China. But lowering the burdens of corporations doesn't seem to work very well, either. Over the past few decades, corporate tax revenues have fallen precipitously:

As a percentage of all federal tax revenues, corporate tax payments have declined from 23 percent in 1960 to 13 percent in 1980 to 8 percent today.

How much these drops have slowed the flight of companies to developing countries is up for debate. But looking at the matter in terms of our bottom line, somebody has to pay the bills around here, especially since the baby-boomers are starting to line up for the Social Security, Medicare and Medicaid that we have promised them. Whether we're in a recession or not, we face a $379 billion dollar budget deficit for 2008.

If we cut taxes across the board, and keep spending upwards of $300 million a day in Iraq, where is the money going to come from? Stimulus may stem the tide for the latter half of the year, but what does it buy us long term? Yes, a small crash is better than a big one. Unfortunately, doping the economy may not do it this time. The home-run streak might just be over for a while.