The Wall Street Journal-20080118-The Stimulus Debate- Clinton Adds Rebate To Economic Proposal
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The Stimulus Debate: Clinton Adds Rebate To Economic Proposal
WASHINGTON -- Sen. Hillary Clinton called for a $40 billion tax rebate to bolster the economy, saying worsening conditions have removed the hesitation she had just days ago about whether it was needed.
Last week, Sen. Clinton proposed a $70 billion economic-stimulus plan with new spending on measures such as aid to those facing foreclosure and help for heating bills. At the time, she said a $40 billion tax rebate could be added to the plan if the economy soured further. But in an interview yesterday, she said the rebate is needed now.
"Given the news that we're receiving about retail sales down, consumer confidence as low as it's been in, gosh, years, I think we've got to look at a larger package," she said. "I'm now in the $110 billion range, which I think is a very good starting place."
Before Sen. Clinton upped her ante to include an estimated $250 rebate for low- and middle-income taxpayers, some critics -- including economic advisers in Bill Clinton's administration -- had said her proposals wouldn't stimulate the economy as much as the plan of her leading rival, Illinois Sen. Barack Obama. The critics said it wouldn't get cash as quickly into the hands of people most likely to spend it.
Sen. Obama's plan, released days after Sen. Clinton's, also would provide $250 rebates to lower- and middle-income families, and $250 bonuses to Social Security recipients. A third Democratic presidential contender, former North Carolina Sen. John Edwards, proposed a $100 billion plan in late December.
Sen. Clinton also said any stimulus package should include remedies to stem home foreclosures. Alone among the presidential candidates so far, she also called for considering regulations on U.S. investments by sovereign wealth funds -- state-owned pools such as those controlled by China and Kuwait -- given the potential for foreign governments' interference.
The New York senator's remarks were part of the rush to embrace a stimulus package in Washington amid signs the economy is in a recession, or soon could be.
The candidates' stimulus proposals, coming a year before the next president takes office, are meaningful mainly as a signal to voters of how they would react to a downturn as president. But as senators, Mrs. Clinton and Mr. Obama can try to push their ideas in congressional debate.
Yesterday, former Massachusetts Gov. Mitt Romney became the first Republican presidential candidate to endorse an immediate economic stimulus, telling reporters in South Carolina that he would propose a tax rebate in coming days.
Two other Republican candidates said the economy isn't yet in need of a short-term fix. Sen. John McCain of Arizona, also campaigning in South Carolina for its Republican presidential primary tomorrow, proposed a long-term economic growth plan centered on cutting the corporate income-tax rate to 25% from 35%, and allowing companies to expense their investments in equipment and technology for tax purposes in the first year of purchase, instead of over several years. As for the short term, he said, "We will get through this rough patch, my friends."
Former Tennessee Sen. Fred Thompson said a stimulus plan might be needed eventually, "but we're not quite there yet."
Sen. Clinton said she initially didn't include tax rebates because she didn't want to provoke a fight over taxes with President Bush and Republicans. They have called for making the president's 2001 and 2003 tax cuts permanent -- a move resisted by Democrats. But yesterday, Mr. Bush agreed to delay his campaign to extend his tax cuts while a short-term stimulus plan is worked out.
Speaking of a stimulus package, Sen. Clinton said: "I think it's got to be a combination of direct spending and assistance through the tax code." The rebates, she added, must be "focused on middle-income, working and poor families. That's obviously going to be one of the discussion points with the White House."
Responding to criticisms of her original plan from Democratic quarters, Sen. Clinton said her proposed new spending on heating assistance and unemployment compensation would quickly get to the needy because both programs are longstanding ones. She estimated that the heating aid would mean, on average, an extra $650 for each beneficiary.
She said the Democratic candidates "share some similar views about what needs to be done. The important task before us now is to actually act."
Addressing widespread concerns about foreign governments' investments in U.S. financial institutions, Sen. Clinton said, "I have been very careful in the way that I've talked about the sovereign wealth funds," which hold trillions of dollars.
But, she added, "I think this increase in government ownership of companies poses risks to market-based capitalism, because governments are fundamentally different actors than private companies that are disciplined by the market.
"These could be potentially instruments of foreign policy by foreign governments," she said. "And they lack transparency. So what I'm trying to do is stimulate a debate." She said the U.S. and international institutions should study a "regulatory framework" for the funds.
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Alex Frangos contributed to this article.
