Strategy for economic rebound
Source News for Social Justice Activists
Date 08/01/21/00:21

Strategy for economic rebound
Smart stimulus to counteract the economic slowdown
by Lawrence Mishel, Ross Eisenbrey and John Irons
January 11, 2008 | EPI Briefing Paper #210

BECAUSE THE UNITED STATES is either already in a
recession or is headed for one, policy makers need to
act now to craft an effective economic stimulus package
to spur growth and job creation. Without a stimulus of
sufficient magnitude, the U.S. economy is likely to see
a decline in growth or even a formal recession, leading
to higher unemployment, declining or stagnant wages, and
a host of other economic problems. A package that
provides $140 billion of stimulus-1% of GDP-would begin
to reverse our economic course by creating an additional
1.4 to 1.7 million jobs.

What suggests the economy is headed toward such dire
straits? The well-known troubles in the housing market
have threatened the health of the broader economy over
the past several months. Until now, it was hoped that
the fallout from the declines in home prices would be
contained-first to the sub-prime market, then to broader
real estate-backed assets, and finally the hope was that
the damage could be restricted to just the financial
sector. Unfortunately, each of these barriers has been
breached, and combined with a broader unraveling of
credit markets, we can expect to see continued
spillovers into other areas of the economy, most
importantly the labor market.

A variety of indicators point to continued woes. Housing
prices declined by a record 6.7% on an annual basis
according to the most recent S&P/Case-Shiller Home Price
Index, and given the record inventories of unsold homes,
prices are expected to fall further.1 Home foreclosures
are on the rise: the largest U.S. mortgage lender,
Countrywide Financial Corp., reported that foreclosures
and late payments rose in December 2007 to their highest
levels on record.2 Together with the rise in oil and gas
prices, domestic consumer spending will almost certainly

Furthermore, job growth slowed over the past year, and
the weakness has begun to show up in the unemployment
rate, which jumped to 5.0% in December 2007,
significantly higher than the 4.5% rate in the second
quarter of 2007. Though real gross domestic product was
strong in the third quarter last year-in part because of
strong export growth-the economy is widely expected to
have slowed since then as the housing market turmoil,
the credit market crisis, and $100-per-barrel oil prices
take their toll.

Leading economists from both sides of the political
spectrum-from Lawrence Summers3 to Martin Feldstein4-
believe there is a strong possibility of imminent
recession, and that the current conditions signal that
action is needed now from fiscal policy makers. Analysts
at Merrill Lynch and Goldman Sachs believe that the
United States may already be in a recession.5 If
correct, the U.S. economy will see unemployment rates
increase further, likely reaching at least 5.5% by the
start of the third quarter of 2008, putting additional
pressure on wages and incomes and further reducing
consumer demand.

The stakes are high. In the last recession, the economy
received only a mild boost from the 2001 tax
legislation, primarily from a provision that provided a
$300 rebate to most taxpayers. The bulk of the
legislation, however, provided little immediate
stimulus, and the economy-especially the job market-was
very slow to recover: job growth, wages, and incomes all
stagnated even well beyond the "official" end of the

Criteria for an effective stimulus plan

There is always debate over what an effective stimulus
package should look like. Many different policies are
purported to stimulate the economy, but it is important
to distinguish between those that will have their effect
in the very near-term to offset rising unemployment this
year and those policies that have longer-term effects.
Any useful stimulus package should strengthen the
recovery immediately and create more jobs in 2008. Some
obvious examples of policies that fail this criterion
are the ones just suggested by the Bush administration,
including eliminating the estate tax and extending the
high-end income, capital gains, and dividend tax cuts
beyond 2010. These policies have nothing to do with the
job creation we will need in 2008.

An effective, appropriate stimulus package should meet
the following five criteria:

1. A stimulus package should generate growth and jobs to
offset rising unemployment. The point of stimulus is to
increase economic growth and thereby generate more jobs.
The reason that employment growth is slowing and
unemployment is rising (and will continue to do so) is
that there is a shortage of demand for goods and
services: we will have the capacity to produce much more
than we will be consuming, and what is missing are
customers able and confident enough to make

The two feasible ways to boost demand are to increase
consumer spending (for example through tax or monetary
policy) or to increase government spending (at the
federal, state, or local level). Any stimulus aimed at
spurring more business investment will not be effective
at this point, because business investment will remain
sluggish until consumer and government demand picks up.
For example, a recent study estimated that business
investment write-offs and the dividend-capital gain tax
reductions included in Bush's tax packages had a small
"bang-for-the-buck."6 Without a rise in consumer demand,
corporate tax relief and other business investment
incentives will not be effective in stimulating growth.

Government spending is more effective than tax cuts in
stimulating domestic demand for two reasons: a portion
of the tax cut will be saved rather than spent
immediately, and consumers are more likely than the
government to spend on imports (rather than domestically
produced goods). Approximately 10 cents per dollar of
consumer expenditures will be spent abroad, while
virtually every penny of investments in public
infrastructure will be spent domestically. Especially
problematic would be more tax cuts directed at the
wealthy, which would not be as effective as tax cuts
directed at the low- and middle-income households who
would spend (rather than save) a larger share of any
extra income.

2. A stimulus package should take effect quickly. The
most frequently cited potential downside of stimulating
demand through government spending is a concern that the
spending will not yield economic activity quickly
because of bureaucratic delay. A smart stimulus-such as
the one proposed here-would have its impact within the
next year. Ideally, an effective package would have some
components that have immediate effect and others that
might have impact in six months to a year, thus ensuring
a solid foundation for the recovery. Without a stimulus,
unemployment-now at 5.0%, half a percent higher than in
the spring of 2007-would likely rise throughout 2008,
reaching around 5.5% by July, and 6.0% by the end of the

3. A stimulus package should raise current deficits but
not affect the long-term budget outlook. The purpose of
any good stimulus package is to boost immediate job
growth. For this purpose we need one-time measures that,
if the recession deepens, can be extended as necessary.
Permanent, ongoing measures that will affect the budget
two or three years from now are, in most cases,
inappropriate.7 Simply put, any stimulus proposal
involving tax cuts and "pump-priming" expenditures must
employ one-time, temporary measures. On the other hand,
a deficit-neutral stimulus package is an oxymoron: if
the plan does not raise the near-term fiscal deficit,
then it has not expanded net expenditures in the economy
and will not lead to new jobs.

4. A stimulus package should target unmet needs. Another
goal of any good stimulus plan should be to meet, where
possible, unmet social needs. For instance, it is widely
acknowledged that there is a huge backlog of necessary
school and bridge repairs and new construction projects.
A temporary spending increase for such infrastructure
would be doubly beneficial in that it would meet the
other criteria listed above but also address an
acknowledged, pre-existing need. Other examples could
include funding needed sewage-treatment plant
construction or making public facilities energy

5. A stimulus package should be fair. The distribution
of wages, income, and wealth in the United States has
become vastly more unequal over the last 30 years. In
fact, this country has a more unequal distribution of
income than any other advanced country. Therefore, a
criterion for favoring one stimulus plan over another
should be that the plan avoids exacerbating income
inequality and, wherever possible, acts to lessen
current inequalities. A temporary increase in federal
revenue-sharing with the states, for example, would
fulfill this criterion well by helping preserve public
school spending, Medicaid for low-income families and
low-income elderly in nursing homes, and other state
programs that could face cutbacks due to state fiscal

Three components of a comprehensive jobs stimulus plan

Between spending and tax cuts, an economic stimulus
package should equal 1% of GDP, that is, about $140
billion over one year (based on the most recent
quarterly GDP figure, 2007q3). Such a stimulus should be
split three ways:

1) Federal spending for individual supports and
accelerated public investments,

2) Aid to states and localities, and

3) Targeted tax rebates.

Federal spending

Additional federal expenditures should aim to: 1)
provide additional supports to those immediately
displaced by the recession, and 2) accelerate federal
investments in priority areas, including bridges, roads,
schools, and environmental infrastructure.

Unemployment compensation

Unemployment compensation is particularly stimulating to
the economy because the unemployed spend virtually every
dollar they receive and tend to do so on necessities
found in their local economy. Mark Zandi of
estimates the stimulative effect of unemployment
compensation at $1.73 for each dollar spent, and a 1999
Department of Labor study estimated that each dollar of
unemployment compensation boosts GDP by $2.15.

Unemployment compensation should be available to every
American who seeks suitable work but cannot find it,
especially as the economy slows and hundreds of
thousands or even millions of workers become unemployed.
To help maintain consumer demand and prevent the economy
from entering a vicious cycle of slowing growth, as
unemployment rises benefits should be extended beyond
the regular 26 weeks currently provided.

In the last recession, national unemployment grew by 2.7
million from December 2000 to March 2002, yet failed to
trigger the national program that would have extended
benefits under current law. Congress finally enacted a
special program of additional benefits-Temporary
Extended Unemployment Compensation-in March 2002, but
not until the official recession had been over for four

As we head into the next recession, Congress has two
choices for reform: either replace the Extended Benefits
(EB) program or fix its trigger mechanism. The better
choice is to replace the EB program-which only extends
benefits by 13 weeks and splits the cost equally between
state and federal governments-with a new, 100% federally
funded program that triggers when unemployment reaches
excessive levels. It makes no sense to burden state
budgets with additional responsibility for unemployment
compensation when the economy is slowing, thus reducing
state government revenues and forcing cutbacks in state
employment. In each of the past three recessions,
Congress has ultimately faced up to this fact and
enacted a supplemental program fully funded by the
federal government. Rather than continue an ad hoc
approach that always comes too late for many of the
unemployed, Congress should enact a permanent federal
program that triggers before unemployment reaches
damaging heights. The right policy would be to extend
benefits by 13 weeks when unemployment hits 5.5%, and
another 13 weeks if it reaches 6.0%.

The other alternative is to reform EB. Federal law
requires states to provide Extended Benefits when their
Insured Unemployment Rate (IUR)-which measures the ratio
of workers receiving unemployment compensation as a
percent of the entire state workforce covered by
unemployment insurance-reaches 5%, coupled with a 120%
increase in the IUR over a base period. EB also triggers
at a 6.0% state IUR regardless of its percent increase.
Unfortunately, the unemployment rate among the insured
bears little relation to (and is far less than) the
percent of unemployed workers overall or to the state of
the job market.

For example, the national average IUR today is less than
2.0%, yet even in the three states whose three-month
average total unemployment rate was over 6.0% in
December 2007 (Alaska, Michigan, and Mississippi), none
had an IUR as high as 3.3%. The Advisory Council on
Unemployment Compensation long ago recommended
eliminating the IUR as a trigger and replacing it with a
total unemployment rate trigger. When a state's three-
month average unemployment rate exceeds 5.5%, Extended
Benefits should go into effect.

Nationally, current law calls for the EB to begin when
the national average IUR reaches 4.0%. That trigger,
too, should be replaced. When the three-month national
unemployment rate reaches 5.5%, EB should be triggered
in every state whose unemployment exceeds 5.0%.

The Senate should also immediately pass the Unemployment
Insurance Modernization Act that is part of the bill
already passed by the House of Representatives (HR
3920). The Unemployment Insurance Modernization Act
would deliver benefits more broadly and provide $7
billion in incentives over a five-year period to states
that adopt reforms to expand coverage among low-wage
workers. This legislation would: provide UI benefits to
workers who are only available for part-time work,
enable workers who leave their jobs for compelling
family reasons to qualify for UI benefits, and consider
a worker's most recent work history when determining
eligibility for UI benefits.

Accelerating public investments in schools,
transportation, and environmental protection

The most obvious response to rising unemployment is to
put Americans to work building or repairing needed
capital assets. Such work puts money in the pockets of
hard working people who would otherwise struggle, and it
can lead to higher productivity, better health, and
better education of our children. The economic activity
and jobs directly created by this spending have a
beneficial ripple effect as, for instance, construction
firms purchase materials and employees spend their
salaries. The resulting stimulus would be geographically
widespread. Such investments should emphasize repairs in
which the work can start and be completed sooner.

The nation faces large deficits in public investment
that need to be addressed. A particular benefit of this
stimulus approach is that constructing a package that
helps address these needs essentially accelerates
investments that ought to be made in any case. In other
words, public investments can in the short run boost job
creation and in the longer run help advance

One widely held concern about including spending in a
stimulus package is that there will be delays and the
economic benefits will come too late to help offset the
rising unemployment. While there may have been delays in
programs decades ago, there need not be any now. We have
identified areas of needed public investment where
projects with completed plans are already identified-the
only element missing is the funding. Consequently,
spending can readily be targeted to projects that can
begin within 90 days. This can and should be done as a
one-time expenditure. Since many of the projects are
repairs to existing infrastructure, the projects will be
undertaken as well as completed relatively quickly.

If the recession deepens, then another round of spending
can take place later. In any case, so many unmet needs
have already been identified that construction could
begin in a matter of a few months on billions of dollars
of new construction and repairs for schools, for
transportation (roads, bridges, etc.), and for
environmental (water and waste treatment) projects.

Estimates of the effects of each $1 billion of
construction spending vary widely, from an additional
14,000 to 47,000 jobs and up to $6 billion in additional
GDP, according to the Federal Highway Administration.
Slack demand caused construction employment to fall by
more than 200,000 jobs in 2007, so there is a
substantial experienced labor force ready to begin new

Environmental infrastructure projects

High-quality drinking water and wastewater treatment are
critical to protecting human health and the environment.
There are 772 communities in 33 states and the District
of Columbia with a total of 9,471 identified combined
sewer overflow problems. Combined sewer overflows
contribute to the ongoing contamination of the nation's
waters by releasing approximately 850 billion gallons of
raw or partially treated sewage annually. In addition,
the Environmental Protection Agency (EPA) estimates that
between 23,000 and 75,000 sanitary sewer overflows occur
each year in the United States, releasing between three
to 10 billion gallons of sewage per year. The EPA
estimates that more than $50.6 billion is necessary to
address combined sewer overflow problems, and an
additional $88.5 billion is needed to address sanitary
sewer overflows.

According to a representative survey of its member
wastewater treatment facilities by the National
Association of Clean Water Agencies, communities
throughout the nation have more than $4 billion of
wastewater treatment projects that are ready to go to
construction, if funding is made available. Funds can be
distributed immediately through the Safe Drinking Water
and Clean Water State Revolving Funds and designated for
repair and construction projects that can begin within
90 days.

School repair and modernization

Public K-12 schools throughout the nation need to spend
about $17 billion a year to maintain existing structures
and grounds, far more than their current budgets allow.
Federal funding for repair and maintenance could be
spent quickly and efficiently, employing many of the
more than 200,000 construction workers who lost their
jobs in 2007, and the many more who will lose jobs as
overall unemployment rises. Repair projects have the
advantage of a short start-up time, as well as a short
time to completion, thus fitting the bill of an
effective short-term stimulus.

There are over 48 million children and another 6 million
adults who attend or work in more than 95,000 public
schools and administrative buildings on a daily basis.
In 1999, the National Center for Education Statistics
(NCES) put the average age of the main instructional
public school building at 40 years.9 Existing buildings,
no matter what their age-but particularly older
buildings-require ongoing maintenance and repair. While
there is no national inventory of how much building
space or land is used in support of K-12 public
education, a conservative estimate puts this at 5.4
billion gross square feet of building area and nearly
700,000 acres of exterior land and site improvements.10
An industry standard for how much should be spent
annually on maintenance and repair is 2% of the
building's replacement value. So a building that cost
$20 million to build, in current dollars, requires about
$400,000 per year for maintenance. Using this estimate
of building inventory, the United States should be
spending approximately $17 billion per year on public
school facility maintenance and repair to catch up with
and maintain its K-12 public education infrastructure

According to an NCES survey in 1999, however, 76% of all
schools reported that they had deferred maintenance of
their buildings and needed additional funding to bring
them up to standard. The total deferred maintenance
exceeded $100 billion, an estimate in line with earlier
findings by the Government Accounting Office (GAO). In
just New York City alone, officials have identified $1.7
billion of deferred maintenance projects on 800 city
school buildings.

Congress should appropriate $20 billion for a major
summer school maintenance program-including such things
as roof repair, painting, carpet replacement,
landscaping, replacing toilet or sink fixtures and
bathroom partitions, window replacement, and maintenance
of heating and air conditioning systems. School
districts could prepare to use these funds responsibly
given even short notice. The funds should be allocated
to State Education Agencies and distributed in
proportion to the student population among all school

Maintenance and repair of school buildings and grounds
is labor intensive work. The skill levels of individuals
involved in this work can range from unskilled laborer
to highly skilled technicians, but mostly involve the
skilled trades-painters, glaziers, carpenters,
electricians, or plumbers. Funding made available to
school districts can be used to engage contractors or to
ensure the ability to retain maintenance workers on
school district payrolls, who are often among the first
laid off during economic downturns.

Highways, bridges and transportation projects

The U.S. Department of Transportation has identified
more than 6,000 high-priority, structurally deficient
bridges in the National Highway System that need to be
replaced, at a total cost of about $30 billion. A
relatively small acceleration of existing plans to
address this need-appropriating $5 billion to replace
the worst of these dangerous bridges-could employ 70,000
construction workers, stimulate demand for steel and
other materials, and boost local economies across the
nation. Only bridges for which architectural and
engineering work has been completed, where construction
could begin within 90 days, would be funded.

In a document entitled, "A Proposal to Rebuild America
by Investing in Transportation and Environmental
Infrastructure," the staff of the House Committee on
Transportation and Infrastructure has identified more
than $70 billion in construction projects that could
begin soon after being funded. All of the projects meet
important needs of commerce as well as safety or
environmental protection, and should be funded
eventually. Starting some of these projects sooner would
provide a major economic stimulus and employ more than a
million Americans, counteracting the job losses from
slack demand and a slowing economy. An effective
stimulus plan could include $16 billion directed at
projects for roads, rails, ports, and aviation; only
projects that can begin within three months would be

State aid to offset reduction in tax receipts

During times of recession, state budgets are hit
particularly hard. Reductions in tax receipts and
cyclical increases in state spending put pressure on
budgets-and since most states have balanced budget
requirements, they are forced to either reduce spending
or increase taxes in times of decreased economic
activity. These actions perversely add to economic
troubles by decreasing the total demand for goods and
services, and thus intensify a recession. As such,
direct federal assistance to states can help prevent
these outcomes and stimulate the economy. In the last
recession, Congress provided $20 billion in aid to the
states, split between general revenue sharing and a
temporary increase in the federal match for Medicaid.
The same kind of assistance should be provided to the
states once again, with $30 billion split equally
between a general block grant and an increase in the
Medicaid match.

There is mounting evidence that states are already
feeling the pinch. Twenty-four states are either facing
a shortfall for fiscal year 2009 or are expecting
problems in the next year or two. According to the
Center on Budget and Policy Priorities, just 13 of these
states face a combined $23 billion shortfall.11

Tax policy

Tax policy can be an effective stimulus, but only if
done on a temporary and "downscale" basis. Tax reduction
should be targeted to those who are most likely to spend
it immediately. Low- and moderate-income taxpayers are
those who will be facing the most immediate budget
squeeze due to the recession, and thus most likely to
spend any extra money received through changes in tax
policy. Estimates by Moody's indicate that
each $1 in tax cuts targeted to low-income households
would increase demand by $1.19.12 In contrast, tax
reductions for capital gains and dividends would yield
just $0.09 per dollar. Second, any tax cut or rebate
ought to be immediate and temporary: the point is to
stimulate consumer purchases now, and there is no need
to lock in tax cuts for later years.

An effective way to add a broad-based boost to
consumption in order to quickly generate economic
activity and job growth is to provide an immediate, one-
time, refundable rebate to anyone who has paid either
payroll or income taxes for 2007.13 A total expenditure
of $65 billion would yield approximately $350 or more
per individual, and $700 per married couple.14 Basing
the tax rebate on payment of either payroll tax or
federal income taxes ensures that the rebate will
effectively target low- and moderate-income taxpayers,
many of whom do not pay income taxes.15

Stimulus and the Deficit

Fiscal stimulus inherently involves additional federal
expenditures and temporary tax reductions that will
increase the short-term fiscal deficit. These efforts
increase the total demand for goods and services,
thereby increasing economic activity and jobs in a
period in which we have rising unemployment and excess
production capacity. If either the temporary tax cuts or
spending efforts are offset by tax increases or spending
reductions, then the stimulus package will be
ineffective in raising total demand because the offsets
take away with one hand what the stimulus provided with
the other. Therefore, a stimulus plan that is "deficit-
neutral" in this year makes no sense. It is possible,
however, to consider a plan that is "deficit-neutral"
over a five-year or longer period.

Monetary policy will not be enough

Many economists typically believe that recessions can be
better fought by the Federal Reserve. With the ability
to quickly influence short-term interest rates, the
Federal Reserve has a powerful lever to influence the
economy and fight recessions. The current economic
situation clearly calls for the Federal Reserve to
aggressively lean against the current downturn.

However, there are several reasons to believe that
monetary policy, while necessary, would not be
sufficient to stimulate the economy under current
circumstances. First, turmoil in the credit market makes
it less likely that interest rate changes will lead to
additional investments through traditional channels.
Lenders are facing a crisis of confidence-in both
borrowers as well as in the reliability of asset
valuations-and are wary of lending.16 Furthermore,
housing prices may still have a long way to fall, so any
boost coming from renewed demand for housing in the face
of interest rate cuts will be muted. While a rate cut
would still likely be beneficial, it is unlikely to have
the same stimulative impact as in the past.

Furthermore, changes in monetary policy, once enacted,
will take around a year to fully benefit the economy.
Hence, while the Fed should continue to reduce interest
rates, we cannot look only to monetary policy to provide
the stimulus the economy needs today.

Finally, rising prices-especially for food and energy-
and worries about acceleration of inflation may place
additional constraints on monetary policy. Charles
Plosser, president of the Federal Reserve Bank of
Philadelphia, recently was quoted as saying, "I am
concerned that developments on the inflation front will
make the Fed's policy decisions more difficult in
2008."17 Furthermore, risks of a disorderly decline in
the value of the dollar might place further restrictions
on the Fed's willingness to reduce rates (or sustain low
rates) during a recession.


Given the tremendous damage that a recession does to the
employment, income, and health of millions of Americans,
Congress should act quickly to keep the economy from
stalling. A total package of $140 billion in federal
spending on infrastructure improvements, aid to the
states, additional weeks of unemployment compensation,
and flat tax rebates would boost demand, create
approximately 1.4 to 1.7 million jobs,18 and help keep
the economy from sliding into a deep recession.


1. See S&P, "Broadbased, Record Declines in Home Prices
in October According to the S&P/Case-Shillerr Home Price
Indices" at

2. Reuters, "Countrywide says foreclosures highest on
record." January 9, 2008, at

3. Larry Summers wrote in the Financial Times, January
6, 2008, "The odds of a 2008 U.S. recession have surely
increased after a very poor employment report, growing
evidence of weak holiday spending, further increases in
oil prices, more dismal housing data and further write
downs in the financial sector. Six weeks ago my judgment
in this newspaper that recession was likely seemed
extreme; it is now conventional opinion and many fear
that there will be a serious recession." at

4. Martin Feldstein was quoted in, January
7, 2008, "We are now talking about more likely than
not.I have been saying about 50 percent. This now pushes
it up a bit above that.' at

5. See BBC News, "Recession in the U.S. has arrived."

6. See M. Zandi, "Assessing President Bush's Fiscal
Policies,", July2004

7. Permanent changes that are appropriate include
enhancements to automatic stabilizer programs. That is,
programs such as unemployment insurance that would
benefit the current economy while 1) also protecting the
economy from future downturns, and 2) that would
automatically ramp down once the recession isover.

8. The extension was still necessary because employment
growth and unemployment levels did not recover for some
time after the official end of the recession.


10. Public schools vary in building and site size
tremendously, but still cluster within a range that
enables an informed estimation of building and land
inventory. If space is estimated at a per student basis,
we can achieve a reasonable estimate of the total U.S.

11. See Elizabeth C. McNichol and Iris Lav, "13 States
Face Total Budget Shortfall of at Least $23 Billion in
2009; 11 Others Expect Budget Problems." Center on
Budget and Policy Priorities, December 18, 2007 at

12. Mark M. Zandi, "Assessing President Bush's Fiscal
Policies,", July 2004.

13. An alternative would be to provide rebate to all
adults regardless of tax-filing status. See Eileen
Appelbaum and Richard B. Freeman, "Declare a Prosperity
Dividend," Issue Brief #150, Economic Policy Institute,
February, 2001, at

14. In 2005 there were 52.5 million joint returns, and
82 million non-joint returns, for a total of 187 million
filers, according to the IRS. If we assume all filers
will receive the maximum rebate, each individual would
receive $348. However, since a fraction of filers will
not receive the full rebate, the maximum rebate for a
$65 billion cost will be slightly greater.

15. A rebate based on federal income tax alone would
omit many low-income taxpayers who have no income tax
liability, but still pay federal payroll taxes.

16. M. Feldstein, Wall Street Journal, Dec 5, 2007, "The
current credit crunch reflects not only a lack of
liquidity, but also a lack of confidence in the
creditworthiness of counterparties and in the accuracy
of asset prices." At

17. BBC, January 8, 2008, at

18. This calculation assumes that a 1% stimulus would
increase GDP and employment. The lower bound assumes a
1-1 increase from the stimulus, while the upper bound
assumes the components of the stimulus would yield a GDP
impact as estimated by M. Zandi, "Assessing President
Bush's Fiscal Policies,", 2004.

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