Bernanke Signs Up For Stimulus; McCain Doesn't Understand Taxes

Now, his conception of a stimulus package and the progressive conception of one are likely to be quite different. But his rejection of neo-Hooverism is as important in the rarefied circles of official Washington as the Powell endorsement is to the Presidential race. Bernanke will be listened to by the Beltway chattering class.

Bernanke suggested that Congress design the stimulus package so that it will be timely, well targeted and would limit the longer-term affects on the government's budget deficit, which hit a record high in the recently ended budget year.

Any stimulus package would need to kick in quickly to entice people and businesses to boost spending and buck up the economy during the period in which economic activity would be otherwise weak, Bernanke said.

Bernanke said the package also should include provisions that would help break through the stubborn credit clog that is playing a major role in the economy's slowdown.

"If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, home buyers, businesses and other borrowers," Bernanke said. "Such actions might be particularly effective at promoting economic growth and job creation," he added.

This is vague, and there's nothing about funding infrastructure projects or state and local governments. Democrats need to shape this better, and if they have to, wait out Bush. But I'm not worried that there will be some spending, just what form it will take. Even the New York Times is recognizing the consensus around this issue.

But the extra spending, a sore point in normal times, has been widely accepted on both sides of the political aisle as necessary to salvage the banking system and avert another Great Depression.

“Right now would not be the time to balance the budget,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a bipartisan Washington group that normally pushes the opposite message.

The latest thing from the McCain camp is to call this kind of stimulus and middle class tax cuts "redistribution of wealth" and "welfare", that 40% of Americans don't pay taxes (I thought they LIKED it when people didn't pay taxes... maybe that's just rich people) and why should they get a government handout? After all, now is not the time to experiment with socialism (says the governor who gives Alaskans thousand-dollar checks from oil revenues all the time).

It's ridiculous to say that 40% of the country doesn't pay taxes. If you buy a bagel anywhere, you're paying taxes. If you're on a payroll, you're paying taxes. The government collects revenue in a number of ways, and the economic ignorance of that statement is shocking. As Matt Yglesias says:

Payroll tax is a tax, ergo if you work you pay taxes, ergo if you work you could receive a tax cut. It’s true that the method by which you deliver tax cuts to people with no income tax liability is via a refundable tax credit, but that doesn’t change the fact that you’re talking about reducing the tax burden on people who pay taxes. You’re offering them a tax cut, in other words. Or as McCain puts it, “socialism.” Meanwhile, George W. Bush is nationalizing banks and John McCain wants to buy up bad mortgages so that those who currently own them don’t need to pay any financial penalty for their unsound lending practices.

The only "welfare" we have in this country is corporate. Obama hit back on this pretty well.

Lately, Senator McCain has been attacking my middle class tax cut. He actually said it goes to, "those who don't pay taxes," even though it only goes to working people who are already getting taxed on their paycheck. That's right, Missouri – John McCain is so out of touch with the struggles you are facing that he must be the first politician in history to call a tax cut for working people "welfare."

The only "welfare" in this campaign is John McCain's plan to give another $200 billion in tax cuts to the wealthiest corporations in America – including $4 billion in tax breaks to big oil companies that ran up record profits under George Bush. That's who John McCain is fighting for. But we can't afford four more years like the last eight. George Bush and John McCain are out of ideas, they are out of touch, and if you stand with me in 17 days they will be out of time.

To relate it to stimulus, if you want the economy to move in the short term you put money into the hands of people who will spend it immediately and not just store it away. The danger is in JUST doing that - job creation needs to be an element, and I think we're going to see that in the next package.