The federal government should pay a $500 dividend to all citizens from the $125 billion budget surplus expected this year to fight off an imminent recession. According to Dr. Eileen Appelbaum of the Economic Policy Institute, a one-time payment would give a quick lift to the economy by spurring consumer spending. The economic boom of the 1990s has re-established the United States as the leading world economy. It has increased employment and raised the real wages of all workers. It is imperative that this economic boom be maintained.
However, the forecast for growth in 2001, according to The Economist, has fallen from 3.5 percent in October to only 1.6 percent this month. To avoid a serious recession the Federal Reserve has twice lowered interest rates. But reduced interest rates by themselves can do little to prevent a recession since they take so long to affect consumer spending.
The Bush Administration has offered a tax cut plan that the president argues will stimulate the economy. However, William Gale of the Brookings Institution argues that Bush's proposed tax cut will fail as a stimulus because it would take five years before taking effect. The tax cuts will not arrive in time to avert a recession.
Additionally, the Bush tax cuts leave many people behind. According to researchers at the Center on Budget and Policy Priorities, the 50 million families with incomes below $26,000 would see their after-tax incomes rise only trivially.
Many hard-working families pay more in payroll taxes than they do in income taxes. President Bush proposes cutting only income taxes. As a result, many families will see little change in the total amount of federal taxes they pay - even after the Bush tax plan is fully phased in.
For many southwest Alaska families, the collapse of the commercial salmon fishing industry has meant a total loss of seasonal income. A prosperity dividend would mean the most to families with young children.
A married couple with four children would receive $3,000. These payments would raise the incomes of families with low incomes more than they would raise the income of families with higher incomes. A prosperity dividend of $500 tax-free from the surplus will get money into the hands of consumers faster than a tax cut; will increase spending more than a tax cut because the money will go equally to all permanent residents, rather than mostly to high-income taxpayers; and will provide the temporary stimulus the economy needs to maintain full-employment prosperity.
As the Alaska experience has shown, distributing a dividend check from the government to the people from the budget surplus is administratively feasible. A federal dividend could easily be modeled on Alaska's Permanent Fund Dividend.
George Owletuck of Marshall has been the chairman of the Lower Yukon Development Council for the past six years.
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