What Kind of Stimulus, Mr. Obama?

Economist Alllen Sinai Before the Senate Budget Committee today:

Federal government purchases have a strong and sharp impact on the economy initially, with the purchases impact multiplier for the first year estimated in a range of 1.4 to 1.8, and can significantly increase employment in the government sector. But this stimulus is not lasting as feedback effects on interest rates, inflation, the dollar and stock adjustments operate to return the level of the economy to its original path within six or seven years. Tax reductions for individuals, permanent not temporary nor targeted tax credits, take longer to have an impact but produce a longer-lasting path of real GDP that exceeds what otherwise would have occurred and more broadly-based jobs increases. The savings out of the tax reductions are used to replenish and reliquefy household balance sheets, initially slowing down the pace of spending but speeding the financial adjustments of households to a more normal state which then supports higher spending for a longer period of time.