I kindly ask you, lady in red, to please not stand so close to me, for I have been blinded by the light.

(Or, A Stimulus For Tomorrow, Part 7)

by von

Steve Benen notes that the passage of the stimulus package changes the argument.  Now, it's not whether the stimulus should pass (or in what form).  It's whether the stimulus is working.

I have some predictions in that regard:  It won't work nearly as well as anyone would like, if it works at all.  (1, 2, Hilzoy's response, 3, 4, 5, 6.) And it seems that others at least accept the possibility that the stimulus won't work (if not my precise criticisms).  Benen continues: 

The New York Times' report on today's bill signing also noted that the White House "has not ruled out a second stimulus package."

I don't imagine the right will respond well to those eight words.

I can't imagine how "the right" will respond to those eight words, given that at least some members of the right think that I'm only worthy of mockery.  I can say how I respond to those eight words, however:

Told ya so. 

The current stimulus package is too small on the front end and too bloated and unfocused on the back end.  It wasn't a stimulus bill so much as a grab bag of goodies.  Of course we can't rule out another stimulus package, because we didn't do a proper stimulus package the first time. 

At least, those are the talking points I'm prepared to start spouting if and when President Obama or the Democratic leadership start talking about a second stimulus package.  It would be more difficult to make those charges, of course, had the Democrats' stimulus package included something like a payroll tax holidayor gotten more Republican votes.  Whatever the merits of my position, the "optics" would have looked wrong.  But, as it stands, the optics are as clear as the merits ... and so I don't think Steve (or anyone else on the D-side of the aisle) should want a round 2 on the same terms as round 1.

Now, none of this is to excuse some pretty lame Republican ideas the last go-round.  There wasn't much of an "R" alternative; the good ideas that were floated by Republicans didn't get traction.  [Sens. Mitch McConnell floated a 1-2 year payroll tax holiday, but no one really addressed it ... for instance, this response blasted a 1-2 month payroll tax holiday as ineffective.  Ummm, not the same thing.]  Sen. DeMint's proposals, which did get a lot of press and thirty-six Republican votes, were bat-crap crazy.  Douthat is typically insightful on such Republican foibles.  But I suspect all of that is going to be forgotten if a request for a do-over comes 'round. 

So, here's a request to my left-leaning overlords, which may even do you some good if there is a need to stimulus part deux.  If there has to be a next time, reach out and pluck a good Republican idea from the idea basket.  One you can live with .... maybe a payroll tax holiday, maybe something else.  Y'know, like President Clinton did with welfare reform:  a good idea that, perhaps unsurprisingly, the current stimulus package starts to undo.  Get more than a handful of Republican "moderates" on board. 

That's bipartisanship. Of course it will infuriate those on the left and the right:  Any good compromise will do that.  But, in this case, your compromise will includes a genuine Republican idea, one that you choose, rather than just cuts by so-called Republican moderates.  That may not just improve the bill.  It may actually improve your political position. 

Seemed to work for Clinton, at least.

UPDATE:  Clarified a sentence in the second paragraph (the one starting with "And ...").

Comments

[hells littlest angel]

Screw bipartisanship. The Republican party is moribund.

[Jesurgislac]

If there has to be a next time, reach out and pluck a good Republican idea from the idea basket.

In order to do that, won't there have to be some Republican ideas in the idea basket?

If Republicans can't come up with any notion of how best to stimulate the economy, beyond their tried-and-failed idea that tax cuts do the business, that's their problem. Your task, as a Republican blogger, would be to help Republicans resolve their problem, not by urging Democrats to at least pick one little tax cut since that's all Republicans can think of, but by trying to think up some actual ideas that could then be put forward for bipartisan discussion.

[Jesurgislac]

...or, what hells littlest angel said.

Pwned.

[Gary Farber]

"I have some predictions in that regard: It won't work nearly as well as anyone would like, if it works at all."

Von, is there anyone who has said, or is saying, that the stimulus bill that passed was a great bill, and is highly apt to work?

Because I haven't noticed anyone, of any political persuasion, saying anything remotely like that, myself.

But, to be sure, my news/commentary reading is really down of late, due to a combination of pain, depression, and some computer problems, so you may well have read such commentary that I've missed. Could you perhaps point to a couple of examples?

Thanks.

[Gary Farber]

"...given that at least some members of the right think that I'm only worthy of mockery."

You wrote there: "Don’t listen to Joel Osteen (or Martin Luther Kjng, for that matter)! He practices Christian Identity Politics."

Those words don't mean what you think they mean.

[(The Original) Francis]

Aha! An empirical prediction. Please tell us the employment rate, annual GDP and other criteria by which you will measure success, and the levels at which the bailout will succeed, partially succeed and fail.

[Gary Farber]

This is impressive advice to you, Von, I must admit: "My point is that instead of berating other people’s work you should put your efforts into a blog of your own."

[russell]

Now, it's not whether the stimulus should pass (or in what form). It's whether the stimulus is working.

When did he sign it, four hours ago? Maybe we need the Speedy Alka-Seltzer stimulus plan, with that fast-acting fizz, instead.

I have some predictions in that regard: It won't work nearly as well as anyone would like, if it works at all.

Dude, don't go out on a limb!

If there has to be a next time, reach out and pluck a good Republican idea from the idea basket.

Look, I'm sorry the payroll tax holiday wasn't in the bill. It's your favorite, and it's a not-bad idea. It has its merits.

In fact, there are many items, most notably tax cuts, in the bill that ought to have attracted Republican buy-in.

But there is no form of this bill short of one written completely and solely by Republicans that would have received their support.

Seriously, do you think adding a payroll tax holiday to the bill would have made any significant change in the vote? If so, what basis do you have for thinking that?

Is there any example you can give me, over the entire month-long debate on this bill, of Republican opposition to the bill decreasing as a result of any change to its substance? I'm looking for one example.

We'll all look forward to your hearty "Told you so" and in the meantime we'll all try to get something done. With or without the folks with an (R) after their name.

[Bernard Yomtov]

Of course we can't rule out another stimulus package, because we didn't do a proper stimulus package the first time.

Surprised to see you agreeing with Paul">http://krugman.blogs.nytimes.com/page/2/">Paul Krugman, at least as to the outcome:

The centrists went to work on a bill that, perhaps inevitably, was a mixture of economic muscle and useless fat; as the price of their support, they cut deeply into the muscle while leaving all the fat in place.

So it's likely you won't be the only one saying "I told ya so," though some of the others might have a different opinion as to whether more or less bipartisanship will produce a better bill.

Seriously, I do question whether it is possible to get more than two or three Republicans on board for any stimulus package that is not almost entirely tax cuts. What sort of sensible package, consistent with the need to actually spend money, do you think would have attracted more Republican votes?

[fledermaus]

If there has to be a next time, reach out and pluck a good Republican idea from the idea basket. One you can live with .... maybe a payroll tax holiday

I actually thought that this was a great idea and couldn't figure out why the GOP wasn't pushing for it even more . . . well I do have my theories on that, but best to say that they all revolve around assuming that the GOP has a dislike for reducing the tax burden on anyone who makes less than 7 figures.

[DrDick]

There are no good Republican ideas to grab, as the growing disaster of the past 30 years has demonstrated. Bipartisanship does not work because the Republicans have absolutely no interest in cooperating in creating a viable plan. They would rather burn the country to the ground for partisan political advantage.

[Sebastian]

Hmm, in my world, the fact that a good idea doesn't attract Republican support isn't a particularly good objection to said idea.

The funny thing is that I would expect you all to think so too, but for some reason you all of the sudden don't.

[Mike Schilling]

I'm only worthy of mockery.

I looked at that thread, and it did nothing to dispel my impression that RedState posters are complete idiots, unable to comprehend the simplest forms of logic or to view anything outside the prism of us vs. them. The leap from "he's attacking an ad hominem argument" to "he's a Palin-hater" was particularly impressive.

[Phil]

Hmm, in my world, the fact that a good idea doesn't attract Republican support isn't a particularly good objection to said idea.

The funny thing is that I would expect you all to think so too, but for some reason you all of the sudden don't.

What "you" are you speaking to, here? Because the people in this who are pointing out that no combination of good ideas are going to attract any additional Republican support are doing so, not because they give a crap about the Republican support, but because von clearly does, and they're trying to disabuse him of his fantasy.

Meanwhile, as russell said, " . . . in the meantime we'll all try to get something done. With or without the folks with an (R) after their name."

[dmbeaster]

When you are thinking about alleged good Republican ideas for stimulus, I hope you rethink your opinion concerning the alleged efficacy of defense spending as stimulus (which was contained in one of your linked comments at Red State).

All spending is stimulus to one extent or another, but defense spending is easily one of the least effective forms of it. Clearly, some level of defense spending provides a large indirect benefit since we are then not dealing with the consequences of foreign aggression (that would have been deterred by a greater defense presence). We are well over that level of spending. Money invested in the next billion dollar ship or fighter wing basically does very little. After the initial investment (which is a stimulus), the end product just sits there continuing to suck money out of our economy for maintenance, etc. Infrastructure spending promotes the economy far more effectively than defense spending -- you can make beneficial economic use of the capital improvements. Think of the financial benefit of the amount spent on construction and maintenance of the interstate highway system compared to a like amount of defense spending.

This reminds me of the silly argument that government spending cannot get the country out of troubled economic times, but allegedly government spending on WWII did that for the Great Depression. Nothing like promoting one of the least effective forms of government spending as the appropriate stimulus.

[AHG]

Link to redstate now goes to an article re: a gay pedophile, lovely fucks that they are.

[Gary Farber]

"Link to redstate now goes to an article re: a gay pedophile, lovely fucks that they are."

No, that's the right set of comments. Sentiment remains on target.

[hilzoy]

I think that the stimulus bill will work, in the sense of reducing unemployment and the output gap by some significant though non-optimal amount. I also think a bigger bill would have been better. I wish this bill had included more money for states, more for non-car transit, etc.

I don't see why you think it didn't include any Republican ideas. Last I checked, Sens. Specter, Snowe, and Collins are Republicans, and they had a lot to do with the final shape of the bill. Moreover, the amount of the tax cuts in the bill was (to my mind) plainly an attempt to win some Republican support. Oh well.

[Gary Farber]

"I don't see why you think it didn't include any Republican ideas."

Von wrote this: "But, in this case, your compromise will includes a genuine Republican idea, one that you choose, rather than just cuts by so-called Republican moderates."

Now, perhaps this is just careless phrasing, but in this sentence, Von seems to be distinguishing between "genuine Republican[s]" and "so-called Republican moderates."

In other words, he's saying that "so-called Republican moderates" are not, in fact, "genuine Republican[s]."

Of course, maybe that's not what he actually meant; I wouldn't know.

[Roland00]

Personally one good right of center idea I seen posted was from Greg Mankiw. The parts I liked from him was advocating a payroll tax decrease/gas tax increase. In the long term make it revenue neutral, but in the short term don't start the gas tax until we are out of this current economic mess.

Of course the downside of all this is that I know he suggested this idea for it made good economic sense and it can be used as political fodder. Those evil democrats increased your taxes it is due to them it cost X dollars to fill up your suv.

Of course a gas tax would hurt but it would also have many positive externalities.

[von]

Three comments:

First, Sens. Specter, Snowe and Collins didn't contribute any ideas to the package that passed -- save the idea to cut. Which probably weakened the bill more than anything. Better have a bad idea done well than a bad idea done badly, or somesuch.

Second, a payroll tax cut is a good Republican idea. It's undeniably stimulative. It's highly progressive, in the sense that it helps the poor more. It helps workers as well as businesses. The only three dings against it are (1) it's costly, (2) it's limited, and thus won't create lasting incentives, and (3) it allegedly has a lower multiplier than spending. (1) and (2) are real, but a feature of any stimulus. (3) is highly arguable, in the sense that it's not clear that spending has much of a multiplier and it's certainly not clear that a payroll tax cut is less stimulative than most of the spending in the last bill. Heck, Keynes even endorsed the idea (albeit in correspondence).

That doesn't mean that a payroll tax is the best idea out there. But to claim that Republicans have no ideas is to ignore the work of Republican economists like Mankiw, Barro, and others. There is a lot more than just the DeMint plan.

Third, to Russell:

Seriously, do you think adding a payroll tax holiday to the bill would have made any significant change in the vote? If so, what basis do you have for thinking that?

Well, it was a component of McCain's bill (which got 40 R votes, more than DeMint) and McConnell's plan. So, yeah, I think there would have been a fair chance to pick up some Rs. The problem would have been that the Ds would have had to drop at least some of their proposed long term spending to allow for a payroll tax holiday.

p.s., Gary - I understood my comments on RedState, and don't need to follow your links. I was trying to point out the stupidity of the post. (I think my first comment was: why is this on the front page or somesuch.)

[bob mcmanus]

...and is highly apt to work?

Because I haven't noticed anyone, of any political persuasion, saying anything remotely like that, myself.

"And I want to thank all the Committee Chairs and members of Congress for coming up with a plan that is both bold and balanced enough to meet the demands of this moment."

Barack Obama, at today's signing ceremony

[John Thullen]

Von is pretty much right here.

Plus, he's the best writer on the Internet.

Except for this: A payroll tax holiday, much as it would be useful, (I think we are screwed regardless of what happens; I mean, people are going to starve to death; the stock market is THE Ponzi scheme), we are not dealing with Von in a position of power (run for office, Von).

We are dealing with people who will come back soon and tell us that Social Security is bankrupt because we emptied it with a tax holiday. They root for failure.

Trust Von.

Do not trust any elected Republican. They want to destroy the government.

They are the enemy; they now self-identify with the Taliban.

[Anthony Damiani]

Honestly, the GOP doesn't seem interested in being constructive here. If they'd actually wanted to get something done, they could have focused on a payroll tax holiday, dropped the rest of the laundry list of demands, and offered it as the price of their support. They could easily have gotten it.

As it was, there was no point in making concessions to their agenda, because they were never, ever going to sign on for this.

[russell]

Well, it was a component of McCain's bill (which got 40 R votes, more than DeMint) and McConnell's plan.

Call me cynical, but I suspect that McCain's plan got 40 votes because it was McCain's.

I could be wrong, but I doubt it.

And maybe you're right, and the bill as passed got ZERO Republican votes in the House and a whopping three in the Senate because it had some Republican-friendly features, but just not the right ones.

But again, I doubt it. I doubt it because it doesn't pass the smell test.

I really do wish that some kind of real bipartisan meeting of minds and wills was available. I don't see it.

Three votes in the Senate, and f'ing zero in the House. And that's zero in the House, twice.

Obama could kiss Boehner's rear end on the Capitol Hill steps and the Republicans would vote 100% against it just to kick him in the nuts.

Think I'm kidding? ZERO Republican votes in the House, twice. Zero. Not five, not two, not one. Zero.

Do you think there are ZERO Republican members of the House who think the stimulus bill, as written, is not worth passing on its merits? I don't.

Good faith is not part of the equation.

IMVHO, it's time for the Republican party to decide if it wants to get on the bus or not. They've pissed away every ounce of their credibility as fiscal conservatives. Our foreign policy is a shambles. The economy is shedding 600K jobs a month, and Obama hasn't been president long enough to blame that on him. Yet. And nobody wants to hear any more crap from them about the heartland and family values.

They have their die-hard true believers, and not much else. And that ain't a lot.

As far as I'm concerned, if they had any sense they'd come Obama's way, rather than expect the opposite. But what the hell do I know.

Either way, it's not my problem.

Sorry about your payroll tax. Better luck next time.

[russell]

Do not trust any elected Republican. They want to destroy the government.

They are the enemy

Hate to say so, but this is my point of view at this point. And I do mean it. Republican office holders are bringing nothing to the table but obstruction and damage.

Disagree if you like, but as far as I'm concerned the onus is on those Republican office holders to demonstrate otherwise. I, and folks like me, owe them nothing.

[bobbyp]

If there has to be a next time, reach out and pluck a good Republican idea from the idea basket

That basket is empty, so what's to pluck?

Y'know, like President Clinton did with welfare reform

Another bad idea that has been grossly oversold, much like the one about Reagan "winning" the Cold War. Clinton should be ashamed of this so-called reform.

[bobbyp]

in the sense that it's not clear that spending has much of a multiplier

This assertion is absolute rubbish.

[Gary Farber]

"p.s., Gary - I understood my comments on RedState, and don't need to follow your links."

Huh?

[Gary Farber]

"Huh?"

To be clear: I don't understand what this is a response to. I made two comments on your set of Redstate exchanges, Von.

One was to, in essence, agree with you that the responses to you were idiotic, and specifically to note the idiocy of the "you should put your efforts into a blog of your own" remark.

The other was to point out that "Christian Identity" has a very specific meaning, as does "Christian Identity politics," so referring to Martin Luthur King practicing "Christian Identity politics" is, ah, unclear, at best.

That you understood what you meant is something I'd kind of thing would be a given.

"I was trying to point out the stupidity of the post."

Well, obviously; what I don't understand is why you just pointed out something so completely obvious to me, or what your "p.s., Gary" comment referred to or meant. Are you offended that I was agreeing with you, or what?

[Gary Farber]

"That you understood what you meant is something I'd kind of thing would be a given."

Should be "I'd kind of think...."

[Bernard Yomtov]

The problem would have been that the Ds would have had to drop at least some of their proposed long term spending to allow for a payroll tax holiday.

No, they wouldn't have. If the issue was the total cost of the stimulus they could just as well have substituted that for some other tax cut and I doubt that trading tax cuts would have garnered any more Republican votes. Of course that constraint existed only because of Republican insistence.

I think what this thread comes down to is the issue of whether the Congressional Republicans were acting in good faith on the stimulus. You (Von) think so. Many of us, myself, included, think that they were not, and that nothing short of ridiculous and counterproductive concessions would have bought any more Republican votes.

[tgirsch]

von:
The current stimulus package is too small on the front end and too bloated and unfocused on the back end.

On the front end/back end distribution, at least, Econbrowser disagrees.

Otherwise, russell wins the thread. I agree with him and Bernard that there's simply no evidence that congressional Republicans were acting in good faith.

Of course, as anyone who watched the commentary on The News Hour can tell you, bipartisanship in a crisis situation has historically been quite uncommon.

[J. Michael Neal]

I have idea why Von thinks that 90% of Republicans voting in favor of a package of 100% tax cuts provides any indication that adding one new tax cut to the package would produce any Republican votes. I won't offer my opinion as to whether they were behaving in good faith, because it doesn't matter. They expressed extreme hostility to any spending measures as a part of the stimulus. Von seems to think that they didn't really mean that. I'm pretty sure he's wrong.

I'd also still be interested in hearing what specific infrastructure spending in the bill Von is opposed to. As I recall, he agrees that infrastructure spending is merited, but doesn't want it in this bill. He said that he wants to give it more deliberation. This is an argument that only makes sense if he objects to any of the actual items. If he doesn't, then more deliberation could only have made it worse.

That's also not the same thing as saying that it is too small. Saying that it should have had more direct transfers is a different argument. I'd even agree with it. As far as I can tell, pretty much everyone here does, too. So, when Von expresses ire towards those of us here, it's seems misplaced, and offered in bad faith. I'm just not sure what his real issue is.

[Francis D]

Sen. DeMint's proposals, which did get a lot of press and thirty-six Republican votes, were bat-crap crazy.

By your own admission, almost 90% of Republican senators were willing ot vote for something bat-crap crazy as an alternative to the stimulus plan. There is no point trying for bipartisanship with the idealogues who would vote for that steaming pile of crap.

As for the house, something batcrap crazy can be seen in the Camp Amendment - the tax cuts with no spending other than on unemployment. 168 out of 178 Republicans in the House voted for that.

In short, about 90% of Republicans in both house and senate will vote batcrap-crazy things. Yes, bipartisanship is possible. With the few moderate Republican representatives who aren't. At that point why should we pay any attention to the Republicans who aren't Snowe, Collins, et al? They certainly won't pay any attention to anything we do. So screw them. Bi-partisanship will never work with the batcrap crazy.

[Rich S]

"If there has to be a next time, reach out and pluck a good Republican idea from the idea basket."

There's a lot not to like in the stimulus bill. The temporary individual tax cuts will have minimal impact, as did the tax cuts of last year and any temporary tax cuts. But what good Republican idea was put forward? More tax cuts? Spending cuts?

First, a two year moratorium on payroll taxes would have little stimulatory effect - unless somehow one can manage the repeal of Milton Friedman's Permanent Income Hypothesis. It would have a bigger impact than the temporary tax cut because it's bigger, but what would be the multiplier? My back-of-the-envelope calculations suggest that it's far less than 1 and probably in the vicinity of 0.5.

Second, there's talk of the stimulus bill being a grab-bag of previously-rejected Democratic proposals. Well, excuse me but perhaps someone could point to something in any of the Republican alternatives that represents anything beyond a previously-rejected idea. The notion that cutting taxes will magically stimulate the economy in the current environment is simply nuts. Memo to "the pot" - perhaps you should refrain from calling "the kettle" black.

Third and perhaps most fundamental, there is a question about what would have the largest immediate stimulatory effect. That's where I'm not particularly enthused about the final result, but von's critique doesn't suggest any room for improvement. The components in the bill that will have the greatest immediate multipliers are things like increasing unemployment benefits (where the marginal propensity to consume presumably is virtually one), direct aid to states (which face liquidity constraints via balanced budget requirements), and building projects (that directly provide jobs to those in construction-related areas, about the hardest hit in this recession). Republican proposals focused on cutting those type of items rather than trying to build on them.

I wish the entire bill was predicated on questions of where did you have the greatest and most immediate impact. The Republicans - as far as I can ascertain - never even made a pretense that was their objective. Then toss in Rush's comment that he hopes Obama fails - a view that appears to be shared by the Republican caucus - and my response is "why do we care what the Republican response is?"

[Gary Farber]

President Obama:

[...] “Now,” he said, “I don’t want to pretend that today marks the end of our economic problems. Nor does it constitute all of what we’re going to have to do to turn our economy around.

“But today does mark the beginning of the end: the beginning of what we need to do to create jobs for Americans scrambling in the wake of layoffs, the beginning of what we need to do to provide relief for families worried they won’t be able to pay next month’s bills, the beginning of the first steps to set our economy on a firmer foundation, paving the way to long-term growth and prosperity.”

Beginning.

[Nate]

Yeah, I think I'm going to have to concur with the people who wonder what exactly Von thinks could win over those "genuine" Republicans, after the votes for "bat-crap crazy" replacements, and the unanimous No votes, and the ineffective posturing of the "moderates". Really, there's not anything to work with there.

[Nate]

Yeah, I think I'm going to have to concur with the people who wonder what exactly Von thinks could win over those "genuine" Republicans, after the votes for "bat-crap crazy" replacements, and the unanimous No votes, and the ineffective posturing of the "moderates". Really, there's not anything to work with there.

[Nate]

Yeah, I think I'm going to have to concur with the people who wonder what exactly Von thinks could win over those "genuine" Republicans, after the votes for "bat-crap crazy" replacements, and the unanimous No votes, and the ineffective posturing of the "moderates". Really, there's not anything to work with there.

[Andrew]

Get more than a handful of Republican "moderates" on board.

That's bipartisanship.

Really? I have been hearing a lot lately how the lack of R votes on this bill is an indication of lack of bipartisanship. I think we need some working definition of the word, because I thought that the civility, attention, and concessions paid to the Rs in the past few weeks demonstrated more bipartisanship in DC than we've seen in many, many years.
The fact they they vote as a brand name is not a reflection of any lack of bipartisanship.

[Ed Marshall]

In theory a payroll tax holiday would be great. I think what you would get is a a bunch of "Social security is going bankrupt, we need to get rid of it" projections using the holiday based revenues. If that didn't work and you ever raised the things back up to normal you would get a bunch of caterwauling about the biggest tax increase evar!

If you took it to 0% it would give me an extra $40 a week. Is anyone proposing 0%? Is my employer paying 0% on FICA? I'd need to see some serious details to decide if any of this is worth it in the long run.

[John Miller]

I am, quite honestly, confused as to how a payroll tax holiday would be stimulative.

Is extra money going into our pocket (a rather minimal amount) going to really make that much difference? It is probably better than a lump sum rebate or credit, but how stimulative is it going to be.

And don't even try to say that it will give employers more money to hire people. There is no reason, based upon recent (last 8 years) history to believe that would be the case.

[von]

I'm sorry that I can't respond to all of the comments on the board, many of which are good (except where they disagree with me). I'm going to pluck out Rich S., for a fuller response, because he does the most complete job of responding to the substance of a central Republican idea, i.e., a temporary payroll tax holiday.

First, a two year moratorium on payroll taxes would have little stimulatory effect - unless somehow one can manage the repeal of Milton Friedman's Permanent Income Hypothesis. It would have a bigger impact than the temporary tax cut because it's bigger, but what would be the multiplier? My back-of-the-envelope calculations suggest that it's far less than 1 and probably in the vicinity of 0.5.

Friedman's Permanent Income Hypothesis is generally applicable to all temporary adjustments in income, whether via a tax cut or a direct payment. So this is an argument against virtually all termporary direct payments as well as an argument against virtually all temporary tax cuts (of which a payroll tax holiday is but one).

I don't get into multiplier discussion, in part because the data on multipliers is terrible. I do agree that the most stimulative government policy (demand-side) is likely unemployoment benefits. So I accept that a payroll tax cut will be somewhat less than that, and I don't argue that a payroll tax cut is a replacement for unemployment insurance. I argue that a payroll tax cut is a replacement for other direct spending or other proposed tax cuts.

Even assuming that the payroll tax generates less bang-for-buck than an alternative, however, a temporary payroll tax cut is incentivizing in a very useful way. The per-worker tax cut is not just felt by the worker; it's felt by the employer as well. Employers cover half of the payroll tax. By cutting the payroll tax, even temporarily, you make it cheaper for employers to keep more workers around during the period of the tax cut. That's a very useful incentive -- for employeres, workers, and society -- during a recession.

[von]

Is extra money going into our pocket (a rather minimal amount) going to really make that much difference? It is probably better than a lump sum rebate or credit, but how stimulative is it going to be.

And don't even try to say that it will give employers more money to hire people. There is no reason, based upon recent (last 8 years) history to believe that would be the case.

John Miller, I hope my comment above to Rich S. is responsive to this concern. The purpose of a temporary payroll tax cut is not just to stimulate demand and investment (by putting money into workers' pockets). Nor am I pinning my hopes on a payroll tax cut increasing labor demand. Rather, my expectation is that a payroll tax cut will limit future job cuts by lowering the cost of labor (relative to capital, debt, etc.).

[John Miller]

von, actually, that is a far more cogent answer than is usually given. It is interesting that that kind of reasoning is generally irrelevant to Congressional Republicans who criticized money going to the states which was for that exact purpose, keeping people employed.

I would argue, based upon rather concrete studies, though, that spending plans, aprticularly on things like infrastructure is far more stimulative of the economy in terms of actually creating jobs, which then brings more money back into the Treasury, both of the Federal Government and of the states, which then helps to offset the cost of that spending.

[Keifus]

Money invested in the next billion dollar ship or fighter wing basically does very little. After the initial investment (which is a stimulus), the end product just sits there continuing to suck money out of our economy for maintenance, etc. Infrastructure spending promotes the economy far more effectively than defense spending -- you can make beneficial economic use of the capital improvements. Think of the financial benefit of the amount spent on construction and maintenance of the interstate highway system compared to a like amount of defense spending.

If the military weren't profitable and paying, I doubt we'd be investing so damn much into it already. Even at the bottom of the pyramid, maintaining military infrastructure and equipment makes jobs (sucks money out of the economy?) just like filling potholes does, and for the stuff that's obsolete, or which we have in excess, we can always sell or donate it (or use it), which, of course, we do. Weapons have a shelf life, and also a market.

There's a good argument that highway spending is a more moral than military buildup, and it may be more stimulative, enabling a wider variety of activity, with, perhaps, some less catastrophic long-term risks for society as a whole. Of course, highway spending has some moral consequences attached to it too--more oil burnt faster. I'd vote for something more forward-looking myself.

[jwg]

There is no way a payroll tax holiday makes any sense to the Democratic majority as long as the Republican minority is determined to do away with (or, equivalently, "privatize") Social Security and Medicare.

Until Republicans accept (80 years later) the need for a social safety net, all talk of payroll tax reduction (permanent or temporary) can only be taken as another attempt to destroy some of the best working social institutions in this country.

[judson]

It's so easy to have theories about about what will and won't work. Truth is none of us have any idea. And for us there is no price to pay for being wrong. My idea is the best; Destroy private credit institutions. Everyone should just stop paying off their debt and accrue no more. Let the banks fight to the death for every last cent.

[Davebo]

Though not on a national level this could be instructive when considering the possibilities for bipartisan compromise with Republicans.

Not very reassuring.

[Tony P.]

Second, there's talk of the stimulus bill being a grab-bag of previously-rejected Democratic proposals. Well, excuse me but perhaps someone could point to something in any of the Republican alternatives that represents anything beyond a previously-rejected idea.

Tax cuts are not, exactly, a "previously-rejected" idea. Previously tried and failed, perhaps. Most Republicans would not own to "failed", of course. Most Republicans view tax cuts the way some wag viewed infant baptism: "Believe in it? Why, sir, I've actually seen it done!"

Things like Medicare for all, or nationalization of major banks, are indeed heretofore-rejected ideas. But the millenium is young.

One idea that cannot properly be called "heretofore-rejected" is high-end tax increases. The fundamental objection to The Government pumping a trillion dollars into The Economy is that government cannot afford it. There's a lot to that objection, since The Government must ultimately tax The Economy to pay for any "stimulus".

If The Economy needs "stimulus", and The Government needs money to provide it, a plausible approach is to raise taxes on the rich and give tax cuts (or services, or paychecks) to the poor. Is this "redistribution"? You bet your bippy it is. Taxing Rush Limbaugh to pay for some of his listeners' unemployment benefits is straight-up socialism. We ought to admit it cheerfully and unabashedly.

We are told that rasing taxes at the high end of the income spectrum will "hurt The Economy". Nonsense. The Economy is a circulatory system. It is a permanent poker game in this specific sense: the objective is to keep the game going, not to reward the skillful and the lucky as efficiently as possible until one player has all the chips. Taxing the big winners to keep the small-fry losers in the game may be "socialism", but if the game comes to an end it stops being fun for the winners as well as for the losers.

--TP

[dmbeaster]

If the military weren't profitable and paying, I doubt we'd be investing so damn much into it already.

I think the military industrial complex exists without regard to profit, and it has bloated well past the point that money spent has any alleged "profit" to it. Of course it is a form of stimulus -- all spending is. The question is its efficacy compared to other forms of spending.

My point is that it tends to be among the least effective forms of stimulus, compared with the alternatives. I am not trying to make any point about the morality of such spending vs. military spending. Up to some level, military spending is essential and unavoidable, although I would argue that we have been well above that level for a very long time.

I am also not trying to pimp highway spending, but simply to use it as something with a long track record of known costs and benefits that can be compared to the marginal benefit of an equal amount devoted to greater spending on the military.

Filling a pothole not only pays the contractor and workers for that effort, but has the ancillary financial benefit of promoting commerce with better roads. The next coat of paint on one of our duplicative aircraft carriers pays the contractor and the workers, but does nothing else after that. I exagerate when I say it "sucks money out of the economy" because the painters get something, but after that, what further benefit is obtained? My point is that adding more military spending to an overly large budget for military spending is an extremely wasteful way to try to stimulate the economy.

[hairshirthedonist]

Taxing the big winners to keep the small-fry losers in the game may be "socialism", but if the game comes to an end it stops being fun for the winners as well as for the losers.

This must be repeated, repeatedly. And why is this such a hard idea to push? (Or so it seems to me, at least.) In a sane world, given that the small-fry losers grossly outnumber the big winners, such an idea would be wildly popular, and populist.

[(The Original) Francis]

I note, for the record, that Von has so far failed to articulate the standards by which he will determine whether the stimulus package is a success or not.

gee, and I thought that one great lesson taught by Republicans to Democrats over the last 30 years was that one can measure the results of government programs.

why no baseline, von? Or could it be that the failure of the stimulus package is a matter of faith?

[Carleton Wu]

"has not ruled out a second stimulus package."

You've jumped, I think, from the WH not ruling something out (and why would they do that now, other than hubris?) to them confirming that the stimulus bill is not stimulative enough (as opposed to, say, the economy getting worse than expected despite the stimulus).
They didn't say that the stimulus isn't stimulative enough. You did. And you make good arguments for it- good enough that you don't need to put them in Obama's mouth.

Also, there may be other reasons for putting off additional stimulus and including it in the normal budgetary process- my understanding is that this may be done via a filibuster-proof process and therefore not have the Broderites chopping stuff out for the sake of chopping.

[russell]

I note, for the record, that Von has so far failed to articulate the standards by which he will determine whether the stimulus package is a success or not.

The stimulus package will be a success if it includes a payroll tax holiday.

Otherwise, not.

[liberal japonicus]

I may have missed the link here, but Nate Silver takes a look at the notion that, had different compromises been made, the Republicans would have changed.

[Bernard Yomtov]

LJ,

Thanks for the link to Silver's post.

It's crude, obviously, but clever and a bit instructive anyway.