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Economics: Dumb Ways to Stimulate the Economy

by Andrew M. Schocket

Mr. Schocket is an assistant professor of history at Bowling Green State University and a writer for the History News Service.

President Bush is advancing his"economic stimulus" package at the nation's peril, and his own.

The president has been pushing a stimulus bill ostensibly designed to boost an economy struck hard by the events of Sept. 11. The bill offers nearly $100 billion in tax breaks and rebates for a handful of wealthy corporations and individuals.

Unfortunately, the plan provides little for those hit hardest by the economic effects of the attacks: the hundreds of thousands of working people who have since lost their jobs.

If this bill passes into law, the federal government will be embarking on a wartime policy allowing a few people to gain from the rest of the nation's losses. By backing the package, Bush will undermine popular support for a conflict that he has repeatedly described as a long-term effort and the defining issue of his administration.

Two previous wartime presidents made similar mistakes. During the Civil War, Abraham Lincoln faced a tough reelection campaign in 1864 because of uneven support for a Union effort that critics called"a rich man's war, a poor man's fight." The Union had adopted a draft but allowed men to avoid the army by hiring a substitute or paying $350 --big money back then.

The wealthy could buy their way out of service while others marched off to risk death, a policy that contributed to massive and widespread draft riots. Meanwhile, the government awarded huge contracts to military suppliers with little oversight. That system led to fraud and inferior equipment that enriched a few manufacturers who overcharged taxpayers and cost many soldiers their lives. Like these divisive measures, the current plan will provide war-related benefits to an already-privileged few at the expense of those farther down the economic ladder.

Lincoln managed to get reelected, but a century later similar Vietnam War policies cost Lyndon Johnson the White House. During that war, federal policy allowed a draft exemption for college students. At the time, family income was the largest single determinant of who attended college. The exemption gave many Americans the impression that the government was protecting the sons of the rich from danger while drafting poor men to send into combat. Accurate or not, the widespread perception of favoritism to the rich undermined support for the war.

The nation's new war on terrorism may not require a draft. However, it has grievously affected the nation's weakening economy and will cost billions, perhaps trillions, of dollars in defense, intelligence, and domestic security outlays. The war will require economic sacrifices by the nation and its citizens. The money for bombs, more intelligence personnel, an Office of Homeland Security, increased antibiotic stockpiles, and new security measures for the nation's post offices and airports will come ultimately from the taxpayers. But broad support for wars continues only as long as the public perceives that citizens are bearing the burden equally and that no one is profiting from others' sacrifices, as presidents Lincoln and Johnson learned.

Bush, apparently, has not. The administration plan includes billions of dollars of tax rebates -- that's right, checks from the federal treasury just like those that many people received this summer -- to corporations mostly unaffected by recent events. It also accelerates previously enacted tax cuts for the highest-income individuals. These windfalls would not stimulate economy-boosting investment or spending. They would simply line the pockets of people who little need it.

In a token concession, the bill provides extended unemployment benefits to some of the people who have lost their jobs since Sept. 11. It's a half-way measure that would leave hundreds of thousands of poor people out in the cold this winter. For the federal government to give handouts to the rich in the name of the war on terrorism while working people lose their jobs is an obvious recipe for general disenchantment. The success of this war effort, like previous ones, will depend upon the goodwill and patience of the American public.

Bush should look to Franklin Roosevelt's example. Support for federal policies during World War II stayed high throughout the conflict because Americans perceived that all had been asked to do their part. The government promoted full employment -- a more sensible approach than the current move to pay the jobless to do nothing -- and asked all citizens to forego many consumer goods. Unless he wants to endanger the war effort and his presidency, that is what Bush must aim for: ensuring that all Americans feel like valued contributors to the war effort.

Bush can avoid repeating the errors of the Civil War and the Vietnam War by taking his cue from the successes of World War II: withdraw the current measures and write a new bill ensuring that Americans share equally and fairly the economic burdens of war.

This piece was distributed for non-exclusive use by the History News Service, an informal syndicate of professional historians who seek to improve the public's understanding of current events by setting these events in their historical contexts. The article may be republished as long as both the author and the History News Service are clearly credited.