WASHINGTON — Here's a closer look at Sen. Hillary Clinton's stimulus proposal:
- Deficit reduction: Clinton pledges fiscal discipline, but the $70 billion stimulus would be a one-shot deal with no budget cuts to pay for it. It would add to a federal deficit that closed the 2007 fiscal year on Sept. 30 at $163 billion. Since much of the additional spending would need congressional approval, it's doubtful it would have an immediate impact.
Subprime adjustable-rate home loans: Clinton calls for a freeze to prevent variable rates from rising for five years or more. She misleads by giving the impression it would be mandatory, when in it would be voluntary. President Bush already has a volunteer freeze agreement in place with mortgage lenders. Clinton aides said that plan encourages a case-by-case approach while she wants industry to adopt a blanket approach. This isn't possible, however, since investors who hold mortgage bonds aren't of one voice in reworking troubled home loans.
Fannie Mae and Freddie Mac: Clinton proposes temporarily raising the portfolio caps of these government-sponsored enterprises so they could buy higher-priced loans in states such as California and bundle them for sale to investors. This idea has languished in Congress for months in a debate over whether and how to change Freddie and Fannie.
Green tax credits: Clinton proposes a "crash weatherization program" to cut home energy costs and to expand tax credits for purchases of hybrid vehicles. Don't expect Detroit or autoworkers to cheer tax credits for Toyota and Honda.
Home-heating assistance: Clinton proposes $25 billion in emergency aid to help citizens regain lost purchasing power for home heating. She correctly notes that the buying power of energy grants fell in recent years amid rising oil and natural gas prices. She seeks to return purchasing power to where it was in 2003. This would help people on fixed incomes but would create pressure to make the assistance permanent and that would strain the federal budget.
Extending unemployment benefits: This is the one stimulus item that both parties already agree on. It would help both the unemployed while they look for work and spur consumer spending. Clinton wouldn't wait for a recession to be confirmed and would have this $10 billion in funding for the unemployed kick in immediately.
Tax rebates: Clinton proposes preparing $40 billion in tax rebates in case the economy falls into recession. President Bush and Congress already are weighing similar numbers, but Clinton's rebate would reach all citizens instead of just some through lower tax rates. Clinton doesn't say what trigger would be used to determine when and if the rebates are needed.