Economic stimulus, at home

Put money in the hands of the people most likely to spend it

EDITORIAL Mayor Gavin Newsom is planning to announce a local economic stimulus package some time this week. The Board of Supervisors is holding hearings on how the city can help the San Francisco economy. As the presidential candidates thrash around with proposals to address the worst economic crisis since the 1930s, local politicians are hoping to do their part at home.

And that's a fine idea. Even in this globalized economy, San Francisco can do a lot to protect its residents and businesses from the ongoing disaster. But the best way to do that will require political courage — and a recognition that economic stimulus works best from the bottom up, not the top down.

The most effective way to get a depressed economy going, in other words, is to put money as directly as possible in the hands of the people most likely to spend it. That means the sorts of policies that big business and landlords will want — say, cutting "red tape" and reducing business fees and taxes — isn't gong to help.

Progressive economists say that on the national level, one of the most effective policies would be a short-term reduction in the payroll tax. Most working people pay 7.5 percent of their wages into the Social Security trust fund, and most businesses match that contribution. Suspend the employee contribution for three months and everyone in the nation instantly gets a significant raise. (The Social Security fund would take a hit, but this is an emergency and that can be fixed later; despite all the gloom and doom, Social Security will be fine for the next half century with just a few minor fixes.)

The idea is that people who get a raise during a recession are likely to spend it, quickly, which pours money into the economy. The same principal can work in San Francisco. Any economic stimulus package will cost money and add to the city's deficit (unless Newsom and the supervisors are willing to raise taxes to fund it). But some short-term policies could more than pay for themselves by jump-starting local spending.

A few ideas:

Place a moratorium on all residential evictions. Barack Obama is talking about a short-term freeze on mortgage foreclosures, which makes sense for the nation. But in San Francisco, where most residents are renters, evictions are far more of an economic threat. The mayor and the supervisors could ask the sheriff to refrain from carrying out any eviction actions for a limited period (and potentially cut off funding for eviction actions).

Create an emergency rent-subsidy fund. Make city cash available to anyone facing eviction because of economic circumstance.

Reduce Muni fares for a few months. Muni is in many ways a tax on the poor and working class, who have no other travel options. Almost every penny that people spend on transportation would go right back into the economy.

Suspend the payroll tax on small businesses. Small businesses create most of the jobs in the city; suspending the tax on the smallest businesses (those, say, with payrolls of less than $500,000) would help the most vulnerable and keep the engines of the local economy from failing. Raising the tax on big businesses would, of course, more than pay for this.

Raise the general assistance payment. Sure, some of that money would be spent on alcohol and drugs, but most would be spent on things like food and clothing.

Spend more, not less, on the public sector. Government spending creates jobs; government programs saved the United States from the Great Depression. Taxing the wealthy to fund public jobs programs makes excellent economic sense at the city level, too.

Those are just a few ideas. The supervisors should devote their hearings to developing more.

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