Spending vs Tax Cuts: Which Provides the Best Stimulus?

This is amusing :

The key to a successful stimulus is one that puts money directly into the hands of the people, not borderline bankrupt states and the bureaucrats who run them to pay off debt.

So giving money to cash strapped states is a bad thing? What happened to states rights and decentralizing federal power? I guess at the end of the day Republicans aren’t for state government, they’re for no government.

After all, its hard to argue that a $1,000 tax credit to a poor family, is a better idea than giving money to a state like Nevada which is laying off thousands of state employees, cutting 36% of their higher education budget, slashing the salaries of teachers, and cutting back or eliminating social services that many people rely on. The bus prices in Las Vegas just went from $2.50 to $4.00.

Not only will stimulus enduced federal and state spending create much needed jobs across the country, while saving hundreds of thousands of jobs, each dollar in government spending produces $1.50 in value to the economy. At least according to Nobel Prize economist Paul Krugman and Mark Zandi, chief economist of economy.com and an
economic advisor to John McCain:

Mr. Zandi, who advised the Republican presidential candidate, John McCain, said in testimony last month before the Senate Budget Committee that nearly every dollar spent in this fashion generates $1.50 or more in economic activity. Repairing a road, for example, means hiring workers who spend their new salaries at supermarkets, which in turn hire more store clerks and stock more groceries to handle the extra spending.

This “multiplier effect” is missing, however, when the stimulus comes as a tax break…

By the way, does anyone else think its funny that John “I know nothing about the economy” McCain is voting against the Stimulus bill but his economic adviser supports it?

Anyways, a lot of conservatives are being forced to eat crow right now since most evidence shows that not only is spending necessary, but the programs that provide the economic advisor to John McCain:most bang for their buck are those republicans typically find distasteful:

Based on Zandi’s study, some of the most efficient ways to spend government money are temporarily increasing food stamps (a $1.73 GDP increase per dollar), extending unemployment benefits ($1.63), increasing infrastructure spending ($1.59) and upping direct aid to financially strapped states ($1.38)

Ouch. Hoisted by their own petard!

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4 thoughts on “Spending vs Tax Cuts: Which Provides the Best Stimulus?

  1. Pingback: Government Spending vs Tax Cuts Part Two « Cognitive Dissonance

  2. Pingback: Some Really Lazy Blogging About How I’m Awesome…Just Like the Stimulus Bill « Cognitive Dissonance

  3. Pingback: Senate Republicans Still Can’t Do Basic Economics « Cognitive Dissonance

  4. Pingback: social media consultant

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