Economics

Stimulus Now, Stimulus Tomorrow, Stimulus Forever

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Economist Arnold Kling muses on stimulus time tables:

Larry Summers famously argued for a timely, targeted, and temporary stimulus. This looks like something that is not timely, with only about 20 percent of it getting into the system in the next 8 months. It does not seem temporary, given that over one-third of it ($291 billion) will kick in at least 21 months from now.

Back in the 1960's and 1970's, Keynesian economists talked about a temporary investment tax credit as the ideal fiscal stimulus. You tell businesses, "invest this year, and you get a tax credit. Wait until next year, and the tax credit goes away."

An investment tax credit is not the stimulus I'm advocating today……But an investment tax credit has the virtue of being timely and temporary, and hence it qualifies as a stimulus idea. The bill going through Congress is not. It is a Galbraithian transfer from the private sector the government.

Kling links to Gregory Mankiw giving a year-by-year breakdown of when specific government purchases in the proposed stimulus bill kick in. Only 8 percent of it will be happening in this unstimulated crisis fiscal year of 2009.

NEXT: PATRIOT 2: This Time It's Stimulating

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  1. It needs to be noted that both Galbraith and Keynes WERE COMPLETELY WRONG ABOUT EVERYTHING

  2. However, if we are to have a stimulus, a temporary tax credit is by far the best option available. Notwithstanding the reputation Keynes has around here, lots of what he said was pretty good for the time period he was in – and about this he’s right.

  3. that said, it’s like choosing an electric shock over a sword in the eye. – neither pleasant.

  4. Stimulus will not work as long as government is in the way in the form of heavy tax burden and excessive regulation. It’s like adding horsepower to a car to help it break through a brick wall. You MAY break through by you are still going to crash.

  5. We still have Great Depression stimulus spending 70 years after the fact. What has changed to think that gub’ment officials, particularly pergressives, have changed. We will be spending Obama stimulus in 2100 if the ruling plutocrats have not been displaced.

  6. Only 8 percent of it will be happening in this unstimulated crisis fiscal year of 2009.

    Those are some slow-moving stimuli! If medicine took this long to kick in, the pharmaceutical industry would have gone bankrupt a long time ago.

  7. Those are some slow-moving stimuli! If medicine took this long to kick in, the pharmaceutical industry would have gone bankrupt a long time ago.

    Nah…they’re too big to fail. There would’ve been a bailout.

  8. Wow! Spending sure falls off a cliff after the next presidential election year.

  9. If we just stimulate it a little more, I’m sure we’ll get it up!

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