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On the question of the tax cuts embedded in the stimulus measure, Jon Cohn spoke to a senior economist on Obama's team, who said:
The spending versus taxes distinction is the wrong way to think about it. The question is at the margin. So one dollar of infrastructure is better than one dollar of tax cuts. But if you already have a hundred dollars of infrastructure then adding one dollar of infrastructure is a lot less effective than adding one dollar of tax cuts.To unpack that a bit, the 101st dollar is less effective because there's no "shovel-ready" infrastructure spending to receive it, not because a $99 infrastructure project induces less demand than a $104 infrastructure project. But the states haven't spent the last 10 years preparing infrastructure plans in anticipation of a massive financial crisis leading to a deep recession requiring huge Keynesian counter-spending on infrastructure. They only have so infrastructure needs identified and plans written. Given more money, they could use it within three years, but not within six months.The need for economic stimulus and the need for infrastructure investment have been combined into a single policy. But they are not the same. A stimulus bill requires money that can be spent in the next six months to a year. Modernizing's America's infrastructure requires projects that could take the next year simply to identify, much less plan. The stimulus bill will not solve our infrastructure problem. There are plenty of projects that are important long-term investments but do not qualify as short-term stimulus. That means they shouldn't be done in this bill, but that does not mean they shouldn't be done. The stimulus bill is a good vehicle for some infrastructure investment, but its passage can't mark the end of our attention to the issue.
