January 24, 2008
Ideas, Good and Bad, for the Stimulus Package
Calculated Risk has a post up bemoaning what the stimulus package is likely to look like. It's actually a "worst idea" thread. But that post also proposes something to me that sounds relatively simple, and more likely than most of these other proposals to work:
Perhaps having the General Fund pay the workers' portion of the payroll tax for a certain period (or for a certain amount earned - say on the next $20K per worker). My guess is that extra take home pay every week or two will likely be spent.
What do you think?
Posted by armand at January 24, 2008 12:07 PM
| Posted to Economics
I have no data to support this, but my gut tells me that a lump sum is more likely to be stimulatey than an incremental increase in take-home pay over an extended period. People don't go out and blow a $50/week raise on a HDTV.
i struggle with what it is we're trying to stimulate. while i agree with jacflash that the big-ticket splurges will happen more with lump-sum checks, and that this is probably an important point for that well-off-ish minority of the population that doesn't live hand to mouth, most people do live hand to mouth, and an ongoing break would also be spent, every penny, over the period in question because, well, that's how hand to mouth works (writes the lowly public servant who fits that description all too well). moreover, for the hand-to-mouthers, won't they mostly spend on necessities? and isn't a higher proportion of necessities made here (i.e., groceries in particular) than the proportion of any of the more luxury-good-ish items that might be bought with a lump sum?
also, of course, the lump sum will be a lot better for that proportion of the population very likely to lose its jobs in the next couple of months or so, who will so no benefit to withholding-affiliated relief if they have no paycheck. but then for those people what's another $1000 going to do, really?
anyway, i'll take it either way, and i'll even reserve judgment on the $70B corporate welfare reported to be in the package until i hear more. but i'm still not sure why the let-the-free-market-punish-the-richies-who-gambled-foolishly-even-if-it-hurts-others-because-it's-better-for-out-long-term-fiscal-health approach hasn't been getting a fuller airing. oh yeah, that's right -- it's unamerican to make decisions that take into account anything that costs now, no matter what dividends it will pay in the next fiscal quarter, or in the next election cycle.