Committee for a Responsible Federal Budget

About Those Additional Stimulus Ideas...

Oct 21, 2009

With unemployment still growing, rising from 9.7 percent in August to 9.8 percent this past September, discussions have developed over the potential need to adopt additional stimulus measures to boost unemployment. With all of the media coverage on these potential measures over the past two weeks, CRFB has compiled a table of some of the more notable short-term stimulus ideas that have been mentioned by lawmakers and experts.

As lawmakers deliberate over whether or not additional stimulus is necessary, it is important for them to weigh the stimulative effects against the potential damage from overborrowing. To successfully walk this tightrope, any new stimulus spending must be fully offset through specific future tax provisions or spending cuts. Policymakers should also keep in mind the considerable amount of stimulus already in the pipeline. Only a quarter of all stimulus funds from the American Recovery and Reinvestment Act have been paid out so far. Over the next few years, over $580 billion more in spending and tax cuts will be going out.

Employment Stimulus Options MentionedCostNotes
New Jobs Tax Credit$271Modified after 1977 credit. Supported by Nobel laureate Edmund Phelps, Dani Rodrik, former Labor Secretary Robert Reich, and Tim Bartik. The credit would likely cost $13 billion in 2010 and $14 billion in 2011
Refundable $3,000-$4,000 tax credit2 UnknownTax credit for each new employee hired, to last for two years. Supported by Arlen Specter (D-PA).
$8,000 First-Time Homebuyer Credit$1 biillion / month3 
 1) Extension as it is 
2) Expansion of eligibility requirements 
Public Works Programs3 Unknown 
Another round of aid to states UnknownState budget shortfalls projected to cut 700,000 jobs over the next two years.3
Extending credit to American manufacturers4 Unknown 
Boosting government purchases of American-made products4 Unknown 
Extend unemployment benefits for 14 weeks$2.4 billion3Has already passed in the House. 14 weeks of benefits for all workers, 20 weeks of benefit support for jobless workers.
Economic Policy Institute Proposal$500 billion5Comibination of $150 billion in state revenue sharing, $40 billion for public infrastructure, $80 billion for employment tax credits, $100 billion in extended jobless benefits. All paid for with a financial transactions tax (raising between $100 billion and $150 billion per year).
Proposals made by House Republicans6 Unknown 
 1) Small business tax deduction of 20% of income Unknown 
 2) Let small businesses band together to buy health insurance mroe cheaply Unknown 
 3) Decrease personal income tax rates UnknownDecrease 15% rate to 10%, and 10% rate to 5% (would promote spending/saving)
 4) Increase net operating loss carry back from 2 to 5 years UnknownWould allow businesses to refile prior tax returns and recover current losses
Payroll Tax Holiday7 Unknown Cut in the FICA payroll tax.

Sources:

1: W.E. Upjohn Institute for Employment Research, here.

2: AP article,

3: Washington Post article, 10/9/2009.

4: Washington Post Op-Ed, 10/8/2009.

5: Wall Street Journal article, 10/8/2009. Full EPI proposal here.

6: Proposals cited in letter to White House on 10/7/2009.

7: Atlantic Monthly blog.