fiscal stimulus

A Bloomberg poll, discussed in this news article, indicates that 55% of respondents believe that "cuts in government spending and taxes would be more effective at creating jobs than maintaining or increasing government spending." I am quoted in the article as follows:

The question is confusingly formulated, because economists usually think of tax cuts and spending increases as part of the same stimulus-based approach, not as opposing approaches. But at root, the results appear to indicate that most Americans think cutting spending, not increasing it, is more likely to create jobs.

But that's almost the opposite of what most experts--on both sides of the political divide--believe. "That wouldn't square with the way we normally think about economic activity in a depressed economy," Andrew Samwick, a former chief economist on President Bush's Council of Economic Advisers, told The Lookout. When the economy suffers from a lack of demand, as it does now, Samwick explained, most economists think increasing spending is the more effective way to generate that demand and get things moving again.

From my inbox, this morning, from Fidelity Investments:

In 2011, Social Security withholdings taxes are being reduced by 2%. Since this money was intended for retirement savings, why not consider putting it into your own workplace savings plan? Check the amount that you are currently contributing and, if you are eligible to do so, consider increasing your contributions now to take advantage of this opportunity.

Why not?  Officially, because I am going to spend that money on things I would never have purchased otherwise, so that I may do my part to ensure enough aggregate demand to continue the recovery.  Technically, because the 2% was not intended for retirement saving -- it is being covered by the General Fund and my Social Security benefits are not any lower because of it.  My generation delays, your generation pays.

Here is Austan Goolsbee explaining the President's rationale for the tax cut deal.  My comments are after the break.

Ah, my work here is done.  From the White House today:

The President on Infrastructure Investment: "This is Work That Needs to Be Done. There Are Workers Who Are Ready to Do It."

I was glad to hear that the definition of infrastructure was broad enough to include more than just transportation networks.  Read the transcript or watch the video at the link above.  Read the Treasury/CEA analysis of infrastructure investment here.  From its executive summary:

On his way out the door, Larry Summers joins the Build While It's Cheap Chorus.  Writing in The Financial Times, Alan Rappeport reports:

Larry Summers, the outgoing director of the White House National Economic Council, said the US must ramp up spending on domestic infrastructure to drive the economic recovery.

Speaking at the Financial Times’s View from the Top conference in New York, Mr Summers called it a “short-term imperative and a long-term macroeconomic imperative” that the US government increase infrastructure investment. He said that a combination of low borrowing costs, cheap building costs and high levels of unemployment in the construction sector made this the ideal time to rebuild roads, bridges and airports.

 I presume that Summers did not come to this view just as he thought about leaving.  But it is worth pointing out that he was one of the chief proponents of "timely, targeted, and temporary" as the recession was beginning.