A Modest Proposal For Economic Stimulus

by Stowe Boyd

The economy continues to sputter, and it's clear that the efforts made so far -- like the one-time impact of $100 billion in tax rebates -- isn't leading to a rebound:

[from G.D.P. Grows at Tepid 1.9% Pace Despite Stimulus - NYTimes.com by PETER S. GOODMAN and MICHAEL M. GRYNBAUM]

[...]

The government unleashed the rebate checks to spur consumer spending, which amounts to 70 percent of the economy. Such spending expanded at a 1.5 percent annual rate between April and June, after growing at a meager 0.9 percent clip in the previous quarter. Economists estimated that as much as half of the growth in the spring was the result of Americans spending their rebates.

“Clearly the tax rebates did give some oomph to the economy,” said Robert Barbera, chief economist at the research and trading firm ITG.

Exports expanded at a 9.2 percent annual clip in the second quarter, up from 5.1 percent in the first three months of the year. Such sales have been enhanced by the weak dollar, which makes American-made goods cheaper on world markets.

Adding to the improving trade picture, imports dropped by an eye-catching 6.6 percent, as Americans tightened their spending. Imports are subtracted from overall economic growth, so the decrease weighs in as positive.

Over all, trade added 2.42 percentage points to the growth rate from April to June. Without that contribution, the economy would have contracted.

But many economists are dubious that either of these trends can continue in the face of substantial challenges to growth already entrenched in the United States, and gathering force in many major economies around the world. Japan and much of Europe now appear headed into downturns, dampening demand for American-made products.

I propose that the federal and state governments should provide large tax credits for capital improvements in residential and commercial properties that would counter the impacts of increasing costs in energy. In particular, providing incentives for home owners and landlords to invest in winterizing homes in the northern states, and to install residential solar in all climates.

These incentives could do a great deal of good:

1. Idled workers in the construction trade would get back to work
2. Local manufacturers of the goods used to winterize and solarize homes would see an immediate increase in demand
3. Demand for energy would drop, and in some cases, homeowners and buisiness might not only counter their own energy consumption, but could actually become net energy producers
4. Low income home owners and renters could have some or all of the winterization directly subsidize through grants, which coul counter the impact of the spike in energy costs that is happening already, and which is likely to cause real hardship this winter.

This is sound and progressive social policy. Meanwhile, the US Congress has fallen into election year stupidity, with the Republicans shouting about offshore drilling -- which wouldn't do anything for years, and then would be too small to make a difference -- and the Democrats are posturing about market manipulation -- which economics argue makes functionally no difference in energy prices.

Comments

[Bill Seitz]

Uh, wouldn't that just increase the federal deficit?

[Stowe Boyd]

Yes, just like the tax rebate did, but the difference is that we would be directing money into corners of the economy that would make a long-term difference, unlike people buying an iPod or somenthing. Winterizing homes could save serious energy for years to come, and would employ people that are now out of work.