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January 19, 2008

When Everyone Sings Kumbaya ...

Many people talk about the virtues of bipartisanship, but in practice it usually results in essentially meaningless or damaging policy. The announced stimulus package appears more the former than the latter, but it could lead to disengagement on broader, longer-term and more meaningful policies, such as making permanent the Bush tax cuts that resulted in a four-year expansion:

President Bush called yesterday for a $145 billion stimulus package centered on tax breaks for consumers and businesses to rejuvenate the lagging U.S. economy, a move that drew unusual bipartisan praise on Capitol Hill but did not boost confidence on Wall Street.

The principles outlined by Bush opened a path to an agreement with congressional Democrats that could come as early as next week and put as much as $800 in each taxpayer's pocket by spring, according to both sides. Bush dispensed with one of the thorniest obstacles to a quick deal by agreeing not to link it to his longstanding quest to make permanent his first-term tax cuts. ...

Indeed, officials on both ends of Pennsylvania Avenue were using the term "kumbaya" to describe the rare consensus developing after a year of partisan warfare. At day's end, the contours of a possible accord were coming into focus. Both Bush and the Democrats want a one-time tax rebate, and officials said a compromise package could include the tax incentives for business investment that the president wants, as well as the social welfare spending, such as extended unemployment benefits, that the Democrats want.

In principle, I support any effort to return tax money to the people who pay it. The structure of the rebate created criticism from John Edwards, who complained that it didn't benefit those who pay no taxes. Edwards wants a handout, not a rebate, and the Bush administration wisely chose the latter. The last thing this economy needs is another mechanism for redistribution of wealth.

Otherwise, this looks like nothing more than an election-year sop. Americans pay too much tax, and that keeps investment and savings suppressed. A one-time rebate only gives temporary relief, and while families will welcome the check, it gives them no long-term reason to plan for investment or significant purchases. Stabilizing an economy requires giving people reason and confidence to invest in it for long-term growth, and a single $800 check doesn't cut it.

It does help the politicians, however, and that's the main goal. The incumbents running in 2008 need to go home and show that they did something about the economy, even if it doesn't do any real good. In the end, this is a Beltway bailout -- and by the time Congress gets it in the hands of the taxpayers, the crisis will likely have passed.


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