Washington, D.C. – The following is a statement by Steve Ellis, Vice President for Programs at Taxpayers for Common Sense, a national budget watchdog group, in response to the release of the President’s economic stimulus plan:

It is unclear whether the real intention of the $674 billion Bush plan is political posturing or economic recovery. Time and time again, this administration has shown the determination to drive legislation that is capable of reaping great political dividends, despite the implications for the long-term fiscal health of the nation. This plan really amounts to a political payback for the corporate supporters and wealthy donors who funded last year’s elections.

The current plan is a grab bag of special interest giveaways that lack any stimulative effect, but instead create a recipe for massive increases in the federal budget deficit. With a war on terrorism, a possible war in Iraq, a homeland security initiative, and promises made on health care and prescription drugs, the President’s plan spends money we don’t have.

There may not be an immediate need for the federal government to step in with any economic stimulus plan. Though growth was soft, the economy still did grow in 2002. As an example, consumer spending was strong for the year, which accounts for two-thirds of the economy. Many analysts believe that the economy is capable of turning itself around faster than any stimulus plan can be implemented. Only $103 billion, or 15% of the total plan would be spent in 2003.

From our perspective, the biggest effect the Bush plan will have is to stimulate the growth of the budgetary black hole. According to the Congressional Budget Office, the 2003 budget deficit is expected to top $145 billion and some say it could reach as high as $300 billion. A growing budget deficit has its own significant economic impact on private savings, leaving less to finance private investment.

At best, this plan is a wolf in sheep’s clothing. For example, the elimination of $364 billion corporate dividend taxes has nothing to due with jumpstarting the economy in the short-run. Enacting this plan under the guise of economic stimulus does a disservice to taxpayers and seems to be a novel strategy to avoid debate about the long-term budgetary effects of this proposal.

A targeted stimulus plan would put money in the hands of Americans who would actually spend it. The benefits of the current plan are directed mainly toward higher-income individuals who won’t spend their windfall. A stimulus plan targeted to middle class and low income taxpayers would have a much greater stimulative effect because the money would be spent and would make its way back into the economy immediately.

A real and effective economic stimulus plan needs to be targeted, temporary, and should not sabotage America’s long-term economic future.

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