Friday, February 08, 2008

Hardly Stimulating

What did the US Congress's "economic stimulus" package exclude?
The Senate's 81-16 vote capped more than a week of political maneuvering. The logjam broke when majority Democrats dropped their demand that rescue proposal offer jobless benefits, heating aid for the poor and tax breaks for the home building and energy industries. (Andrew Taylor and Julie Hirschfeld Davis, "Congress Sends Economic Aid Plan to Bush," Associated Press, 7 February 2008)
In other words, the item most likely to mitigate recession is the very one eliminated from the package:
According to estimates several years ago by Mark Zandi, chief economist of Moody's, the measures that produced the biggest "bang for the buck" were increases in unemployment benefits, which produced about $1.73 in additional demand for every dollar spent. Tax rebates to all citizens generated about $1.19 for every dollar spent, while reductions in tax rates produced only 59 cents per dollar. (Edmund L. Andrews, "Fed Chief's Reassurance Fails to Halt Stock Plunge," New York Times, 18 January 2008)

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