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People of my generation are familiar with the old Sears.  It was a one-stop shopping retail store that in addition to providing a pleasant shopping experience was associated with quality, dependability and reliability – old fashioned traits.

The Sears of today is an example of what’s taking place in many of our cherished institutions.  It was transformed into Sears Holdings by Edward S. Lampert, the billionaire hedge fund manager in 2005.  Since that time, Mr. Lampert’s cost cutting methods have caused Sears stores to look shabby.  In one example reported by the New York Times, a visitor to a Sears store found mismatched floor tiles in the lobby, old shelves and ragged carpet.  They found a pail designed to catch the water that dripped from a broken pipe from the ceiling.  The pail had been in place for two weeks.  To make matters worse, prices are higher at Sears than at comparable, better managed stores.  The explanation is that investors such as Mr. Lambert are exclusively interested in wringing every dollar from their investments even if it means hurting the institution and people’s lives. 

This same phenomenon is occurring at nursing homes as investors have begun acquiring nursing homes as an investment.  Unfortunately, unlike the Sears example, where people can choose to shop elsewhere (and they are), if investors take over too large of a share of the nursing home market, customers, who want adequate care, may not have many other options. 

It offers rebates for all but the wealthiest individuals. This was the result of a compromise between Democrat and Republican lawmakers. Republicans wanted to limit rebate payments to taxpayers only with those earning more receiving the highest rebates. Republican recommendations were criticized both on fairness (since this is a government give away, it’s not fair to shut out the poor who needs it more?) and effectiveness (most economists believe the government will get more bang for its buck by getting most of the money into the hands of low income people).

It does not extend unemployment and food stamp benefits. Although economists know that these are more effective for stimulating the economy, the Democrats dropped their demand for this type of stimulus. In exchange for Democrats caving on food stamps and unemployment, Republicans dropped their demand that previous tax cuts enacted by Bush that benefited the wealthy be made permanent.

Nobel Prize economist Joseph Stiglitz wrote a great article in today’s New York Times. In it he offers solutions to our current economic crisis. He believes the best approach is one that includes both short term and long term solutions.  He decries Bush’s tax cut solution to every problem.  He believes that type of approach has served to perpetuate excessive consumption in American society.  Despite marketers claim otherwise, excessive consumption is bad for the economy.  The large tax cuts that have been enacted over the past years are linked to lower family income for middle and lower class Americans.

Like many other economists Stiglitz believes that in order to get more bang for the buck, income  in the form of tax rebates and increased unemployment benefits should go to lower income individuals.  He also believes money should go to local governments. According to him, in response to shrinking income, local government will automatically cut services and that acts as a destabilizer. He believes the feds should put money into building the physical and social infrastructure. Without a strong infrastructure, America cannot maintain its economic competitveness. 

I agree wholeheartedly with Stiglitz.  For too long, any economic problem has been greeted with the idea of tax cuts that in the long run benefited the rich at the expense of the middle and lower classes.  One result of our leaders’ penchant for tax cuts has been the disinvestment in America.  The result has been a gradual decaying of America’s physical and social infrastructure,.  The recent booms have only served to camouflage the decay.

That’s what Republican lawmakers are proposing.  The proposed tax rebate is to be between $800 and $1600.  If Republicans have their way only those who paid taxes last year will receive it.  That means that a family of 4 who earned $24,000 last year would not be eligible, or that a family that earned $40,000 last year would only be eligible for a partial refund. 

Give me a break.  If the government wants to give a handout (and that’s what it is), why should they only give it to high earners?  In fact the proposal by Republican lawmakers has been critiqued based on fairness and effectiveness.  Critics argue that it is the low income individuals, who are the ones most likely to need the extra cash. 

Even if you’re not interested in fairness, the advantage in getting money into their hands is that you’ll get more bang for your bucks.  The goal of the rebate is to stimulate the economy by getting extra money into people’s hands in the hope that they will spend it.  Out of necessity, low income people are likely to spend the money quickly, while higher income individuals may choose to hold on to it or place it in investments. 

I lived through the Reagan years and witnessed first hand the rise in poverty and homelessness.  That’s why I’m always happy to read an economist who gives a dash of reality to that era.  Paul Krugman in today’s New York Times did just that. According to him, during the Reagan era, although the rich got richer, there was little sustained overall economic growth.  By the late 1980s middle class income had barely risen from what it was a decade before, and poverty in America was actually higher.

As for me, I witnessed a large numbers of people joining the ranks of the homeless.  Whereas, before the homeless seemed limited to only a small number of mostly males, who were obviously mentally ill, suddenly I started to see large numbers of women and children living on the streets.  It seemed a betrayal of everything I believed about my country, and it shook me to the core.