Obama Stimulus 2.0

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We've had eight years of stimulus ideology put to action by Bush in the form of tax breaks and deficit spending, leading to depression and near bankruptcy.

Luther of IL 11:33AM January 06, 2009

Robert Barro's research showed that temporary tax rebates are ineffective because people are rational and don't adjust their spending behavior. Last years tax rebate was temporary and no surprise it had little stimulative value. Here is John Taylor's paper. Look at page 13 Figure 10:
http://www.stanford.edu/~johntayl/FCPR.pdf
I believe John Taylor, however, was wrong in his characterization of Mark Zandi's simulation results. He found that lump sum refundable tax rebates have a multiplier effect of 1.26. It would be unfair to characterize last years tax rebate as "lump sum" when many people recieved as little as $300 when others recieved $1200. The greater the degree of inequality in the tax rebate the lower the multiplier. Temporary across the board tax cuts only have a multiplier of 1.03 for example. Other things have much more bang for the buck of course, such as Food Stamps (1.73), extended unemployment benefits (1.64) infrastructure spending (1.59) and aid to the states (1.36), all things that are part of the stimulus plan. Mark Zandi's testimony on fiscal multipliers is available here:
http://www.economy.com/mark-zandi/documents/Small%20Business_7_24_08.pdf
Make Work Pay is a permanent lump sum refundable tax credit. Unfortunately Mark Zandi ran no simulation for such a tax cut.
But, consistent with Robert Barro's research, it is likely to have much more than a 1.26 multiplier effect.

Mark A. Sadowski of DE 11:08AM January 06, 2009

I agree completely, W is not to blame; We are. We the people cast their votes four years ago and decided that he was doing just fine. That being said I think it high time that we stop with all of the petty finger pointing and do what we should have been doing all along, work together. This economy is the direct result of too many people making decisions that were in THEIR best interests, not ours.
I agree with HillbillyBill that we need to get our house in order first, the US accounts for a great deal of the international economy right along with the EU, China and Japan. I am not an economist so can not argue the merits or the deficiencies in the new stimulus package. I can, however, say that whatever we do it needs to be everyone on the same page, enough of it's so and so's fault and he said she said.
This economic crisis is not and American tragedy, read Republican/Democrat; It's a HUMAN tragedy - get it together folks!

Oran of NE 8:25PM January 05, 2009

Yes the international economy is the only one left. But putting this on W's overflowing blame plate is not fair. The international economy, outsourcing, industrialization of third world countries is all because of the speed and cost of communication. Read Thomas Freidman's "The World is Flat". It expertly covers the events in the last 20 years that have spread prosperity to any corner of the globe.
W's blame is his inability to hire brains who could handle the complexity of the new economy or motivate legislation that curbed the government luxuries provided to citizens as entitlements.

Tim McGee of CA 7:37PM January 05, 2009

@ HillbillyBill of TN
It is unfortunate that you don't seem to realize that our economy is international. Due to globalization and the outsourcing of so many of our industries (give a special shout-out to the Bush Administration for enabling that), our economy is now a world economy. Making any effort to concentrate on "our" economy without consideration for the global economy is futile, because it can no longer be separated from that of the world.
We have the ability to create new jobs and industries, thereby shifting the burden of our collective economic health from the mortgage industry to other sectors, but it still involves the international community. Enough of this America first cowboy crap, which incidentally played a key role in digging this financial hole in the first place. It's time to think about being a global citizen and looking at the bigger picture.

justelise of NC 11:16AM January 05, 2009

Why should promoting the general welfare of U.S. citizens and insuring their domestic tranquility depend on
"general equilibrium effects of a modern international economy"
Let's first put our own house in order and then--and only then--take on the general equilibrium of the international economy.

HillbillyBill of TN 10:44AM January 05, 2009