January 24,2008

Hearing Statement of Sen. Max Baucus on Strengthening America’s Economy: Stimulus That Makes Sense, Part 2: Economists

Hearing Statement of Senator Max Baucus (D-Mont.)
Strengthening America’s Economy: Stimulus That Makes Sense
Part 2: Economists

Willa Cather once wrote: “Religion and art spring from the same root and are close kin.
Economics and art,” she wrote, “are strangers.”

Today, despite Cather’s admonition, we will seek common ground between economics
and art. We will continue our examination of economic stimulus. And we will consider
whether we can find any artful solutions for the American economy.

Tuesday, we discussed the criteria for what makes sense for fiscal stimulus. A consensus
is developing that stimulus needs to be timely, targeted, and temporary. Today, we
discuss specific proposals with two prominent economists.

There are reports that a deal may be close on the House side. The Senate will want to
speak, as well. We want to ensure that Congress does its utmost for the American
people. I have spoken with Senator Grassley, and we have agreed that we will hold a
markup in the Finance Committee next week.

For example, tax rebate checks for middle- and lower-income Americans could provide
an immediate stimulus for the economy. Middle- and lower-income Americans would
spend those rebates quickly. That would provide income to businesses across America.
And those businesses would then spend that money. CBO has said that tax rebate checks
could be very cost-effective.

Another example would be expanding unemployment insurance benefits. In recent
recessions, Congress has extended the number of weeks that unemployed workers could
receive benefits. We could do that again. We could provide a further extension for
recipients in high-unemployment states. And we could also temporarily increase the
dollar amount of benefits to help unemployed workers to pay their bills.

Unfortunately, under current law, fewer than four in ten unemployed workers receive
unemployment insurance benefits. To address this problem, we could extend eligibility.
For example, we could extend benefits to part-time workers.

I understand that there may not be anything on unemployment insurance in the House
deal. I believe that is a mistake. And I hope that we can improve on that when we
consider the bill here in the Senate.

Another example would be tax incentives for businesses. Businesses are employers.

Keeping Americans employed is an important way to fight economic decline.

We could allow companies experiencing losses in the current economic downturn to
deduct those losses against income from prior tax returns and get an immediate tax
refund. The refund would inject cash that could allow a company to survive, retain
workers, and maybe even expand.

Another option would be to temporarily allow businesses to deduct from their taxable
income more of the money that they spend on investment. This would encourage
businesses to spend now on buildings, equipment, and other physical capital.

Others are suggesting stimulus proposals related to the housing sector. Still others
advocate fiscal relief to state governments who are struggling to comply with balanced
budget requirements.

So let us see whether there’s any art in economic stimulus. Let us press to find that
common ground between the two disciplines, and between the two parties. And let us try
to find those artful solutions for the American economy.