It's been one hundred days since the stimulus bill was signed, and the Administration is commemorating the event with announcements about the bill's beneficial effects; they're highlighting 100 specific projects. On the other hand, I see via Andrew Sullivan that Daniel Indiviglio makes a bunch of silly arguments about the legislation. He starts off making the case that consumer confidence numbers are a result of the stimulus package -- which somehow invalidates them -- but there's no real connection to be found between the stimulus and consumer confidence at this particular point in time. 
The main tax breaks in that package with immediate effect on consumers have been in effect since April as lessened paycheck deductions. Most of the major infrastructure funding is still going out the door and wouldn't account for broad changes in consumer confidence. Similarly, federal funding for unemployment benefits and other forms of aid to states is still being distributed, and most folks who are on unemployment, though no doubt happy to see their benefits extended, are not typically confident consumers. In fact, in the fact of rising unemployment, the raise in consumer confidence probably has more to with psychological factors rather than economic "green shoots." Oh, and incidentally, economists believe that Bush's spring 2008i stimulus package -- the one Indiviglio cheerfully disdains -- was likely responsible for most of the GDP growth in the 3d quarter of 2008. My favorite observation of Indiviglio's is that we will have to pay for all this spending eventually. Obviously! Even before the recession, we would have needed to increase taxes to pay for the deficits of the Bush administration. Will the relatively small upper-income bracket tax hikes scheduled for 2011 have a huge negative affect on growth? I doubt it. They certainly didn't hinder growth in the nineties. Will major tax reform that could come in the latter half of the president's first term at the earliest have a huge negative effect on growth? I doubt that as well. But will the stimulus help ease our way through this recession, keeping people at work and minimizing productivity loss? Absolutely. The real question is whether we spent enough to do so.Indiviglio portrays himself as the only realist who understands that the economy won't be zooming to new heights anytime soon -- perhaps he's getting his news from CNBC? His favorite economic indicator seems to be the DOW -- but most serious observers (and the folks in the administration) realize that growth is going to be slow to come in the next few years; policymakers from Tim Geithner to Ben Bernanke have made clear they understand the dangers of correcting policy too quickly at the end of a recession. A useful analysis demands an understanding of the trade-offs between counter-cyclical spending now and debt later. Since Indiviglio apparently doesn't believe in fiscal modifiers or the stimulus itself, and seems to imply that the government's intervention were in fact counter-productive, I'm curious what his alternative economic strategy would be.
The main tax breaks in that package with immediate effect on consumers have been in effect since April as lessened paycheck deductions. Most of the major infrastructure funding is still going out the door and wouldn't account for broad changes in consumer confidence. Similarly, federal funding for unemployment benefits and other forms of aid to states is still being distributed, and most folks who are on unemployment, though no doubt happy to see their benefits extended, are not typically confident consumers. In fact, in the fact of rising unemployment, the raise in consumer confidence probably has more to with psychological factors rather than economic "green shoots." Oh, and incidentally, economists believe that Bush's spring 2008i stimulus package -- the one Indiviglio cheerfully disdains -- was likely responsible for most of the GDP growth in the 3d quarter of 2008. My favorite observation of Indiviglio's is that we will have to pay for all this spending eventually. Obviously! Even before the recession, we would have needed to increase taxes to pay for the deficits of the Bush administration. Will the relatively small upper-income bracket tax hikes scheduled for 2011 have a huge negative affect on growth? I doubt it. They certainly didn't hinder growth in the nineties. Will major tax reform that could come in the latter half of the president's first term at the earliest have a huge negative effect on growth? I doubt that as well. But will the stimulus help ease our way through this recession, keeping people at work and minimizing productivity loss? Absolutely. The real question is whether we spent enough to do so.Indiviglio portrays himself as the only realist who understands that the economy won't be zooming to new heights anytime soon -- perhaps he's getting his news from CNBC? His favorite economic indicator seems to be the DOW -- but most serious observers (and the folks in the administration) realize that growth is going to be slow to come in the next few years; policymakers from Tim Geithner to Ben Bernanke have made clear they understand the dangers of correcting policy too quickly at the end of a recession. A useful analysis demands an understanding of the trade-offs between counter-cyclical spending now and debt later. Since Indiviglio apparently doesn't believe in fiscal modifiers or the stimulus itself, and seems to imply that the government's intervention were in fact counter-productive, I'm curious what his alternative economic strategy would be. -- Tim Fernholz
