December 21, 2001


New Plan Filled with Costly Multi-Year or Permanent Tax Cuts
That Would Do Little to Stimulate the Economy

PDF of factsheet
HTML of report
PDF of the report

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The House of Representatives approved a new stimulus package in the morning of December 20. An updated Center analysis issued December 20 finds that the package is largely a multi-year tax-cut package, rather than a package primarily aimed at simulating the economy now.

The new Joint Tax Committee estimates also show that 92 percent of the cost of the package over five years and 95 percent of the cost over ten years consists of tax cuts.

These proposals are poorly designed and likely to prove of limited effectiveness. Most unemployed workers with low or modest incomes would be unable to afford insurance even with the proposed tax credit. In addition, the tax credit would subject workers to the vagaries of the individual health insurance market — without significant market reforms to ensure that affordable policies are available — which would make the credits of little use to many older and sicker workers. Furthermore, the National Emergency Grants program is designed to address the need for job training and related employment services in individual localities where events that have caused significant job losses have occurred. It is not designed to respond to problems created in most or all states as a result of a national recession and has no experience or infrastructure to provide health insurance for unemployed workers who lack it.

With the Administration projecting unified budget deficits at least in 2003 and 2004, the Center's report notes, there is little rationale for measures that would produce substantial revenue losses in these years and would constitute inefficient and ineffective ways of stimulating the economy now.