The Wonk Room has been arguing recently that an economic stimulus package is a necessary step towards recovering from the current financial crisis. The counter argument – which Matthew Yglesias calls “Neo-Hooverism” – is that the government should exercise fiscal restraint and curb spending, out of concern for widening deficits.

However, during a hearing today before Congress’ Joint Economic Committee, New York University Economics Professor Nouriel Roubini explained that failure to enact a fiscal stimulus could actually result in wider deficits as the economy contracts. In his estimate, this would send the U.S. into a “very severe recession.” Watch it:

Roubini is part of a growing chorus of voices calling for a fiscal stimulus. Yesterday, Gov. David Paterson (D-NY) and Gov. Jon Corzine (D-NJ) joined in, saying that “state governments would face devastating cutbacks if they did not receive assistance soon”:

“We are cutting all we can,” Mr. Paterson told the House Ways and Means Committee. “Therefore, we feel that targeted, sensible actions by the federal government will provide relief for us now.”

CAP’s Michael Ettlinger agrees, noting that “of particular importance are steps to help state governments so that they don’t become a drag on the economy as their revenues dry up and demand on their services grows.”

Today, the economic stimulus package also received an endorsement from Professor Martin Feldstein, an economic adviser to Sen. John McCain (R-AZ). In the Washington Post, Feldstein wrote:

The only way to prevent a deepening recession will be a temporary program of increased government spending. Previous attempts to use government spending to stimulate an economic recovery, particularly spending on infrastructure, have not been successful because of long legislative lags that delayed the spending until a recovery was well underway. But while past recessions lasted an average of only about 12 months, this downturn is likely to last much longer, providing the scope for successful countercyclical spending.

As Matthew Yglesias noted, Feldstein “gingerly avoids pointing out that this is the reverse of what his preferred candidate is proposing.” Indeed, McCain has said that he will freeze government spending on everything besides what he deems to be “vital” programs.

Feldstein believes that government spending is the only way to avoid a deeper recession. Will McCain get the message and endorse a full stimulus package?

The winners and losers of the Bush years are now clear.

Today, Exxon-Mobil announced third quarter profits of $14.83 billion, the most profitable three months of any U.S. company in history.

These profits represent annual profits over 250% of the levels at the beginning of the Bush years. Over the same period, real average wages for the American worker have stayed essentially flat, growing only 2% over eight years.

Real median household income was lower in 2007 (last data available) than it was in 2000, after growing 13% from 1992 to 2008.

These huge oil company profits come even as the American economy has shrunk 0.3% and slides into recession.

John McCain’s plan to solve this crisis? A budget busting tax plan that would give a $1.2 billion tax break to Exxon-Mobile ($4 billion for America’s largest oil companies) and give nothing to over 100 million Americans.

Digg It!

On the stump, Gov. Sarah Palin (R-AK) has been emphasizing Sen. John McCain’s (R-AZ) plan to cut the corporate tax rate from 35 percent to 25 percent, citing the oft-repeated claim that the U.S. rate is the “second highest in the world.”

However, yesterday on CNBC, Sen. Claire McCaskill (D-MO) was asked if the “second highest” rate needs to be cut, and responded with the true story: the U.S. tax code is riddled with loopholes that enable corporations to pay far less. Watch it:

McCaskill is quite right to say that corporations benefit from the intricacies of the tax code, as it contains myriad “loopholes, shelters, and giveaways that minimize, or completely eliminate corporate taxes.” This week, in fact, the Center on Budget and Policy Priorities released a report showing that “the U.S. corporate tax burden is smaller than average for developed countries” due in part to the “plethora of generous corporate tax breaks“:

Corporations in 19 of the member states of the Organization for Economic Co-operation and Development paid 16.1 percent of their profits in taxes between 2000 and 2005, on average, while corporations in the United States paid 13.4 percent.

The CBPP noted that the “second highest” charge “while true…gives the false impression that the corporate tax burden is greater here than in other developed countries.”

This all makes perfect sense, since the U.S. also collects below the OECD average in corporate tax revenue. The Treasury Department actually estimates that “various corporate tax breaks will cost the federal government more than $1.2 trillion over the next ten years.”

Instead of worrying about the amount of taxes that corporations are paying, perhaps Palin should focus on the 100 million middle class households to which the McCain/Palin economic plan gives no benefit.