It's In the Way that You Use It

by Eric Martin

Ezra Klein links to a chart put out by the CBO which breaks down which elements of the stimulus bill were the most, well, stimulating in terms of bang for the buck.  The conclusions should not be shocking, though they run directly counter to many of the conservative arguments percolating during the stimulus debate (the same arguments that will be resuscitated should discussion of a follow up stimulus bill begin anew).

Leading the list of high-multiplier items is direct spending by the federal government, infrastructure aid to states and localities, other types of aid to states and localities, and transfer payments (think unemployment insurance and food stamps) to individuals. At the bottom of the list are corporate tax cuts, the new homeowner's tax credit and individual tax cuts.

Right.

(h/t Benen)

Comments

[tgirsch]

I sense a von reply coming. I wonder what song title he'll use....

[Jesurgislac]

I'm thinking Von is going to stick to the "Kill more Afghans!" song for a while, Tgirsch.

[mds]

Notice that a "temporary" payroll tax holiday (aka "Guarantee Social Security's Destruction") is nowhere to be found? The thing that would actually work like gangbusters hasn't been tried yet. Especially when you consider that hiring lots more people would be the natural free-market reaction to periods of low demand, were it not for the pernicious effects of the payroll tax burden. Heck, self-employed workers would save twice as much, and would then be able to hire two of themselves.

[tgirsch]

Jes:

While I disagree with von on, well, just about everything, I've found that he generally argues in good faith, so your jab at him strikes me as somewhat over the top.

[Jacob Davies]

The most annoying thing about the debate prior to the stimulus is that the actual discussion of the effects of different kinds of spending was minimal. All spending is not alike.

Whether the exact size of the multipliers is known isn't as important as the relative size. For good and not at all complicated reasons, the multiplier effects of spending on healthcare and education are large, those of tax cuts are small. All the deficit-hawk idiots who were concerned to get as many tax cuts into the bill as possible were really just ensuring that the people got the minimum bang for the buck. Why that is supposed to constitute effective management is beyond me.

[Carleton Wu]

Notice that a "temporary" payroll tax holiday (aka "Guarantee Social Security's Destruction") is nowhere to be found? The thing that would actually work like gangbusters hasn't been tried yet.

iirc von's argument was that the payroll tax was faster, not that it had a higher multiplier. Which doesn't have to be your argument, but I think that was the primary case for those sorts of actions.
Now that the recession has revealed itself to have been much deeper than anticipated, I think that argument has lost a lot of merit (ie speed was less important than bang-for-the-buck), but that wasn't apparent beforehand.