Candidates rush to unveil stimulus pledges

Mitt Romney on Friday became the latest presidential candidate to promise a fiscal stimulus plan in a week where recession fears have begun to dominate both nomination races.

Hillary Clinton, who holds daily economic “round tables” with voters, was the first to respond to President George W. Bush’s proposed stimulus, which she said “short-changed” the poorest families.

Like most of the candidates, who would be unable to implement their proposals until next January, long after they were needed, Mrs Clinton’s response was heavily skewed towards the campaign trail.

In Saturday’s nominating caucuses in Nevada, the state’s large Hispanic population could prove decisive. African American voters will hold sway over next week’s primary vote in South Carolina.

“The Bush approach would fail to fully help the millions of lower-income senior citizens who are under enormous financial stress,” Mrs Clinton said. “And it would disproportionately leave out African American and Hispanic families who have, on average, lower incomes than white families.”

In the past few days, the economy has begun to dominate the speeches and campaign schedules of the Democratic presidential candidates to the exclusion of most other issues.

With a slightly longer delay, the Republican candidates, including Rudy Giuliani – who is pinning his hopes on winning the primary in Florida, which would be in recession if it were a country – have also come up with stimulus plans.

But economists have responded coolly to the Republican proposals, which they say are not geared towards the short-term fiscal boost the economy needs. Mr Giuliani’s plan is based on tax reform, including making Mr Bush’s tax cuts permanent, new tax incentives for health insurance and indexing the alternative minimum tax to inflation.

John McCain’s proposals centre on a corporate tax cut from 35 per cent to 25 per cent and a new tax incentive to boost research and development. Mr Romney has yet to spell out the details of his plan. Mike Huckabee has not produced a plan.

“Reducing the corporate tax rate might make long-term economic sense but it does nothing to address the short-term needs of the economy,” said Tom Gallagher of International Strategy and Investment. “They are clearly designed to appeal to the primary voters rather than meet the counter-cyclical needs of the moment.”

The Democratic candidates are awarded slightly higher marks for plans that would inject short-term liquidity into the economy by putting cash in the hands of lower-income voters. They also better conform to conventional wisdom that any stimulus be “timely, targeted and temporary”. But they are also loaded with political sops.

For example, Mrs Clinton’s $70bn (€48bn, £36bn) stimulus plan, which on Thursday she increased to $110bn, offers $25bn worth of spending on home heating -–a drastic increase from the current $2bn in annual federal spending. “It is not clear the bureaucracy could cope with that kind of increase and it isn’t a very rapid way of getting cash into people’s hands,” said an economist at a prominent think-tank. Her plan would also include $40bn in targeted tax rebates for the middle-class.

Economists describe Barack Obama’s $75bn plan as more effective since it would provide an instant $250 tax cut for every American and extend the period during which the jobless could claim unemployment benefits. John Edwards offers similar measures.

The candidates are also producing a stream of economically focused television adverts. “In this troubled economy, how can so many millions of people simply not be heard?” Mrs Clinton says in her latest spot.