Stimulus: The Right Ratio Of Tax Cuts To Spending Increases Is...?
I've been asked this question every day this week, usually by reporters: Does the stimulus bill include the right combination of spending cuts and tax increases?
The answer is actually very simple:
- There is no generally agreed-upon formula for combining tax cuts and spending increases in a stimulus bill.
- Economic policymaking is at least as much an art as it is a science.
- The right ratio of tax cuts to spending increases is whatever it takes to get the bill enacted.
- It looks like this bill is going to be enacted.
- Therefore, by definition, the mix in this bill is correct.
Most people reading this won't like it. They want more of something and less of something else; want the spending increases or tax cuts to be different, want the bill to be larger or smaller, insist that it reflect a certain theory or ideology, or prefer some combination of all of these.
But at some point theory, ideology, theory, and personal perferences have to give way to the practical. In this case, that means that the legislation has to be enacted.
That makes the proper ratio of tax cuts to spending increases whatever it takes to get the bill through the House and Senate and signed by the president.
Unless, of course, you think that doing nothing is perferable to doing something and that you'd rather not have a bill at all if it means enacting this one or enacting whatever is acceptable to a majority in Congress. If that's the case, I suggest you:
- Read the U.S. Constitution.
- Admit you're in the minority on this issue at this time.
- And admit that you're less interested in policymaking than in getting a political win, forcing a loss on your opponents, and/or being ideologically pure.
Is it a Tax Cut?
But if the people paying most of the taxes aren't receiving any money, and people who aren't paying any taxes are, is it really a tax cut?
Or is what we have spending, and more spending, just under different categories?
Stimulus
Haven't we tried both tax cuts and government spending for the last 8 years?
The Bush administration gave us 2 tax cuts and the largest budget deficits in the history of the country. Now Obama wants to add on to that with another round of tax cuts and even more government spending. I doubt this will have a positive long term impact on our economy, just like it didn't help the Bush administration.
Agreed, but...
With so much wo/manpower available for work, and with interest rates for the government at lows, now surely must be the time to emphasize restoration and building of new infrastructure. If not now, when? Do we wait for high interest rates and tight employment?
What is pork?
I've been struggling with this, and came across this op ed piece. Before you write it off as a useless liberal POV, read it and the excellent Republican response written by Craig Westover (below the article). I found both perspectives to be excellent, and both have merit.
http://tcdailyliberal.com/blog/2009/02/pork-the-most-meaningless-word-in...
yeah, it's gotta be balanced
The thing is that we know that tax cuts are unlikely to do much in the way of stimulating the economy. We also know that some kinds of spending work better at the stimulating the economy than others. Military spending is relatively inefficient, probably because so much gets grabbed as profit by contractors and we no longer use our military as a means of extending our commercial power. Research spending helps, but not in the short run. The best bet is an inefficient jobs program since the big gap in spending is between having a job and not having a job. Hire teacher's aides to go over nursery rhymes with schoolkids or shovelers to neat up the piles of dirt along the highway. The money will get spent before it hits the floor.
Of course, the argument is that it has to be balanced. Some of the stimulus money needs to get wasted on tax cuts, just as you have to give a patient with an infection some antibiotics and a spoonful of sugar water.
Stan, Pragmatism and
Stan,
Pragmatism and compromise, when the alternative is inaction or "letting the 'perfect' be the enemy of the good", are indeed preferable and more responsible and moral.
But determining and "educating" the public on what would be ideal -- or what would have been ideal had it been politically achievable -- is still very important. The public needs to have an informed sense of what would be (or would have been) good or better policy so we can have a better sense of what policies/choices/packages to push for now and in the future, and what politicians to reward or punish.