Just recently I chatted with Douglas Holtz-Eakin, the former director of the Congressional Budget Office and a current economic adviser to John McCain's presidential campaign. (He's also a senior fellow at the Peterson Institute for International Economics.) I asked him what he thought of the idea of temporary fiscal stimulus for the economy. Both President Bush and Congress seem intent on offering up packages.
Speaking strictly for himself and not the campaign, Holtz-Eakin said he didn't think too much of the idea, noting that the economic consensus is "that for short-term fluctuations in the economy, the best course of action is to let the Fed handle it.... [It's difficult] to get the right package through Congress in a timely fashion. The notable exception was 2001 when the tax cut arrived at exactly the right moment."
Plus, stimulus can turn into an excuse for pork-barrel spending. Holtz-Eakin recalls testifying before Congress back in 1993 when the Clinton administration was considering an infrastructure spending package to stimulate the economy. Boston Mayor Ray Flynn was there, too, and told Congress he had a whole slate of projects ready to go if Uncle Sam came through with the dough. "See, you usually end up with a lot of junk," Holtz-Eakin says. A better move, he argues, would be to get rid of all the uncertainty for households through something like eliminating the alternative minimum tax.