Stimulus Now, Stimulus Tomorrow, Stimulus Forever
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.
