I could comment on how the bill that passed Congress with certainly not the most bang for the buck (even if certain rightwing comments to posts earlier today to claim that this bill was the best possible), but I decided to turn the microphone over to Jared Bernstein:
they could have crafted a package that would have had a lot more bang-for-the-buck. My earlier analysis of the House bill was that, given its emphasis on tax rebates and business deductions, we’d be lucky if it provided a one-for-one boost to GDP. That is, if the stimulus package amounts to about 1% of GDP, and it looks like this one does, you want it to boost GDP by at least that much. Some economists score the rebates as about one-for-one, or even higher, but I’m skeptical. So many people are so indebted right now that they’re likely to save the rebate or use it to pay off debt, neither of which directly boosts growth. And the business tax cuts…oy. Economy.com looked at 13 different stimulus ideas and scored this one the lowest, right behind making the Bush tax cuts permanent. For every revenue dollar we sacrifice, we expect to get back a measly 27 cents. By leaving out extended unemployment benefits and other more directly stimulative measures, like helping revenue-strapped states invest in infrastructure (roads, school repairs), the Congress and the White House missed the chance to get a significantly bigger return on our investment.
Jared’s point seems to be that politics trumped good economics. That’s captures my view on this very well.
Update: Paul Krugman sort of agrees with some of the comments here:
Meanwhile, Congress and the Bush administration have reached agreement on a much-hyped stimulus package. But the package, while probably better than nothing, is unlikely to make a noticeable dent in the problem – in part because the insistence of the administration and Senate Republicans on blocking precisely the measures, such as expanded unemployment insurance and food stamps, that are most likely to be effective.
This came after Paul noted that only long after the end of the last two recessions it took to see a serious recovery and why he thinks this episode may replicate this poor performance. But Paul has some advice for the next Administration:
In particular, now would be a good time to think about the possibility of going beyond tax cuts and rebate checks, and stimulating the economy with some much-needed public investment – say, in repairing the country’s crumbling infrastructure. The usual rap against public spending as a form of economic stimulus is that it takes too long to get going – that by the time the money starts flowing, the recession is already over. But if this turns out to be a prolonged slump, which seems likely, that won’t be a problem.
He then wonders about how the next President will address economic issues and ends with “stay tuned”. Well said!