A BETTER STIMULUS BILL

By adding an extension of unemployment benefits and including more low-income people in its tax rebate, the stimulus package passed by the Senate Finance Committee on Wednesday will do more to boost the economy than the plan passed by the House of Representatives.

In addition to including low-income seniors and disabled people who would be left out of the House package and increasing the rebates to the lowest-income recipients, the Senate Finance Committee package would extend unemployment benefits by another 13 weeks for jobless Americans who continue to search for work. These are large improvements that would get more money into the hands of people who will spend it, the key to any economic stimulus package.

Numerous economists and the Congressional Budget Office have ranked higher unemployment benefits as one of the two strongest economic stimulants. The other, increased food stamp benefits, is not included in either stimulus package.

Mark Zandi, chief economist for Moody’s economy.com, calculated that extending unemployment benefits would generate $1.64 of additional economic activity for every dollar of cost.

Further, these additional funds could be sent out and spent more quickly than the tax rebates included in both the House and Senate bills. Additional unemployment benefits could begin to be sent out as quickly as 30 days after a bill is passed. Tax rebates would be based on 2007 tax filings and are not expected to start being mailed until mid-May, after the Internal Revenue Service has processed some of the 2007 returns.

The Finance Committee bill, supported by committee member Sen. Olympia Snowe, also changes the tax rebates to ensure they reach more people. It includes rebates for Social Security income and disability benefit recipients who don’t have earnings and it provides the same – not smaller – rebates to low- and moderate-income families. Under the House-approved bill, those who earn less than $3,000 a year would get no rebate and those who paid too little in taxes would get only half the $600 per person rebate that would go to higher earners. The Finance Committee bill also includes language to ensure that poor families do not have other forms of assistance reduced because of the rebates.

The Senate Finance bill has its problems. It offers rebates to families with incomes up to $300,000 – twice the limit of the House bill – which raises the cost of the package. It includes tax breaks for renewable energy and energy efficiency, which while needed, do not belong in a short-term stimulus package. It does not include state fiscal relief, a proven stimulus that is needed at a time when the federal government is cutting Medicaid and other funding to the states. Nor does it include additional money for food stamps or heating assistance.

Still, by including rebates for more people and extending unemployment benefits it is an improvement over the House package and given the pressure to quickly pass a package, it should be approved without a lot of tinkering.