Tuesday, February 03, 2009

Hoyer's limit on stimulus

Noted economist That lying fool Rep. Steny Hoyer has identified the precise amount of stimulus needed.

$900 billion, give or take.

You see, $800 odd billion is just fine. Over nine, and man, whew! You're really pushing it there!

Of course, Hoyer is in no position to know how much stimulus is economically warranted. So he's simultaneously admitting two things:
  • that $900 bn is a politically determined arbitrary figure
  • that the Democrats are working on a definition of spending = stimulus no matter what it's spent on
Projects like dog parks that were wasteful and stupid before do not magically become less wasteful or stupid due to some exogenous event.


Anonymous said...

Hey Joe - what's projects have demonstrated efficacy in terms of stimulus spending. I get that you're now a member of the loyal opposition - but in my limited perusal I haven't seen what the Republican's are counterproposing or what data underpin that support. Seems like stimulus checks (sort of like a tax cut right?) didn't bump the economy and for many folks went into savings/paying off debts. Given that personal spending is down and saving is up - seems like tax breaks would do the same thing...

Sockless Joe said...

Partisans on both sides claim their side knows better what works on a "bang for your buck" basis. Frankly, I haven't seen any evidence in favor of the spending side, but then again I don't read the sorts of things that would make that argument. So take that for what it's worth.

The stim checks sent out in 2001 were part of a compromise w/ the Dems in order to get tax cuts through. I don't recall whether a similar deal was struck in 2008, though if it was it was a lot smaller than 2001/2003.

Remember, it is basically a Dem idea that one time payments would help. The more conservative R's were against it.

The difference between a stim check and a tax cut is permanence. A temporary tax cut will not have the same effect as a permanent tax cut. If you get $250 from grandma you stick it in the bank. If you get an extra 20 bucks a month in your paycheck you start a Netflix subscription, etc. because you have the expectation of future revenue. The same dynamic applies to business spending.

I think even if we accept the premise that spending is needed that some spending is going to be more beneficial than others. Infrastructure, yes. Dog parks and condom drops, no. Lots of in-between.

Likewise, certain tax cuts will work better than others.

For instance, cutting the FICA tax will have a targeted effect on employment, household wealth, and corporate profits (but has other downsides like killing the Social Security trust fund and exposing to the public how much tax is really confiscated for entitlements). Cutting the corporate tax rate would help the stock market and have a positive but less targeted short term effect on employment.

Sockless Joe said...

just to amend something...

the 2001 rebates were bush's idea from the campaign, based on surplus. Gore's idea of paying down debt was actually more conservative, though the soc. sec. "lockbox" was a joke.

the 2008 rebates were fundamentally a dem idea though.

Samay said...

A dog park becomes less wasteful because it absorbs surplus asphalt, fencing, benches, etc. AND LABOR that in more flush times would be purchased by the private sector.

So that benefit adds to whatever benefit the project already had, and counterbalances the negative impact of the excess spending.

Hey, it worked before, unlike the constant refrain of tax cuts.

Sockless Joe said...

Well that's the debate, right there. What really works?

Conservatives are keen on pointing to Christina Romer's work on the efficacy of tax cuts.

I think it's fair to say that some spending is better than others, and some tax cuts work better than others. For instance, I don't think cutting the personal income tax would be terribly beneficial right now. You also have to have some guestimate as to where any given tax falls on the Laffer curve, and also how it compares internationally. On those two points I think you can make a good case for lowering the corporate tax rate.

yes, the dog park does what you say. but what is the economic value of the dog park after it's built? And where do those employees go after the dog park is built. ("Dog park" being a placeholder for any number of beautification programs.) I've criticized Obama's plans for improving efficiency in federal buildings, but at least that has some lasting benefit.

And now, you've raised the price of labor and commodity goods, making them incrementally less affordable to the private sector.

If there is any price that should be propped up by government intervention it should be housing, which has a multiplier effect on bank reserves and would stabilize household wealth.