Sen. Hillary Clinton (D., N.Y.) announced plans Friday for an economic stimulus package during a campaign speech in Commerce, Calif. The plan would offer 37 million families immediate relief with $70 billion of stimulus.
Clinton said: "We need an immediate strategy to get our economy back on track. I would work with leaders from both parties to pass an aggressive, fast-acting stimulus package to create good new jobs and revitalize our economy."
The plan calls for a $30 billion fund to assist states and cities with the foreclosure crisis. The subprime crisis has had a clear effect on both municipalities and states: It has shrunk property tax revenues, diminishing their ability to forestall foreclosures.
Clinton repeated calls for bold action to stop foreclosure, including a 90-day moratorium on foreclosures and an automatic freeze on subprime rates -- far bolder than Treasury Secretary Henry Paulson's voluntary plan.
The plan includes $25 billion for energy assistance and $5 billion in energy investments to spur green job growth. Furthermore, it offers $10 billion to help workers needing unemployment insurance because of a weak job market.
The use of government funds to stop economic recession raises an ideological question. Should we prime the pump with government and private-sector funds, or should we let the market correct on its own with an easing of credit? The only aid to the economy so far has come in the form of interest rate cuts. Sam Patel
suggested today that
easing hasn't really raised the money supply.
Cutting interests rates, however, has no effect on tax policy. Many would object to the use of tax dollars (or government issued debt) to bail people out of their personal financial problems. Furthermore, the government may want to be careful when interfering in the subprime crisis. Mortgages and other bonds represent a contract between two parties and unilateral government action may not even be legal. (I brought this issue up in
discussion of the Paulson plan.)
The plan contrasts starkly to those put forward by President Bush. The administration has preferred not to allocate federal money to resolve our economic problems. President Bush spoke from the bully pulpit on the strength of the economy, and Paulson's plans have yet shown to be effective (the SIV fund collapsed and no data exists on the voluntary subprime program).
Republicans lambaste Clinton in debates because they say she plans huge spending increases paid for with higher taxes. My inbox box usually gets at least one email from the Romney press office blasting Clinton or one of his opponents for "acting" like her.
During a conference call to discuss the plan, Clinton's chief economic adviser, Gene Sperling, commented that this was the first plan Clinton has issued that doesn't use pay-as-you-go rules. He said: "New money is needed to stop the spending pullback that's causing a negative ripple effect on the economy."
Sperling stressed that the plan would be temporary. Furthermore, the plan's stimulus would be fast-acting because it is progressive and intended to help those most likely to use the funds immediately.
Sperling also points out that Clinton understands the recent plight of the economy. Employment numbers have shown a loss of private sector jobs, the housing market faces its worse downturn since the Depression and the Institute for Supply Management (ISM) manufacturing data has retracted to recession levels in spite of a weak dollar.
Let's face it: The economy is bad. The Clinton plan offers a possible plan of action to stop the bleeding before things get worse.