Rendell’s Stimulus

Yesterday, Gov. Rendell announced his wealth redistribution scheme, which he calls “economic stimulus”. His plan includes

  • Cash welfare payments: Rendell is proposing spending $130 million (borrowing it from the rainy day fund and paying it back later) and calling it “tax rebates.” This “rebates” would be given out as welfare payments to lower income families – most whom have no income tax liability. At the same time, Rendell denounced tax cuts, claiming that “now [facing possible recession] is not the time.” The suggestions that welfare “stimulates” the economy and tax cuts do not is based on taking the lessons of the past 50 years and all economic thought and doing the opposite. (For more on this type of stimulus plan – which mirrors what is being pushed in congress, see our featured commentary for today, and previous posts here and here).
  • Borrow now, pay later: Rendell is proposing borrowing billions for more corporate welfare.
    • $1 billion (over two years) for his Jonas Salk Fund, which he is proposing for the third straight year.
    • $750 million in new RACP borrowing, which is the main tool for borrowing money – which takes it out of the private economy – to give out to select corporations in the form of corporate welfare.
    • $850 million in borrowing (spent over three years) for the Energy Independence Fund, a hedge fund for the Governor. Last month the buzzword for supporting this corporate welfare scheme was “energy independence” and ending terrorism, today it is “economic stimulus” (FYI, for a fun drinking game, watch the Governor’s budget address and take a drink every time he uses the phrase “economic stimulus,” even if, like me, you only drink Mt. Dew).
    • $700 million in borrowing (over three years) in the capital budget (unclear whether it will be paid back with General Fund or Motor License fund revenue).to rebuild infrastructure (bridges and dams) – it appears this is in addition to Act 44 borrowing and any revenue from a proposed Turnpike lease.
  • $100 million more for “Business in our Sites” corporate welfare program, $10 million for the “Infratructure Development Programs”, and extending other tax incentives.

You will note that Governor Rendell believes all the money should be spend in the next three years, which coincidently means it will be spent by his administration.

Meanwhile, House Republicans unveiled an economic stimulus package based on sound economic principles–i.e. cutting tax rates. They propose a zero-growth budget, reducing the personal income tax, uncapping net operating losses on the corporate income tax, and eliminating the gross receipts tax on electricity bills