Charles Wyplosz makes a useful point:
A tax rebate is not, by any means, the most productive use of a dollar of stimulus. You may want a tax rebate because it can be done incredibly quickly, but you also want unemployment insurance and food stamps and infrastructure spending. It would be a real shame if progressives assumed control of the government and then responded to this crisis with a Reaganite package.
One reason why governments adopt partial measures is that they fear their costs. This is a mistake. The cost of the sum of the four measures is most likely to be significantly lower than the sum of each measure's potential cost. Importantly, a comprehensive plan that includes all four measures raises the probability of success and therefore the odds that the upside will materialise. Thus, a comprehensive plan should encourage governments to emphasise measures that increase the upside.In other words, there's a chance that the bailout could eventually be budget neutral, or even revenue positive, for government, But that's only true if it works. If it doesn't work, and a bunch of banks go bust and their collapse rock the credit markets, the government will not make back its money and the economy will take a hard and painful hit, and no one will ever pay back the workers who lose their jobs or the shop owners who lose their business. That militates rather strongly against half measures. Not only is the cost of failure high, but so too are the possible rewards of success. Wyplosz continues:
Banks, which have been so good at regulation arbitrage, will indulge enthusiastically in bailout arbitrage, further increasing the costs. This means that comprehensiveness is not enough. All countries with systemically important banks need to closely coordinate as central banks have done so far...In addition, as the world tips into a global recession, macroeconomic policies are urgently needed to dispel the risk of depression. Central banks have been extraordinarily active in providing liquidity. They must shift to also supporting the economy. Fiscal policy too must contribute. It may be difficult to contemplate larger deficits at a time when huge fiscal commitments must be made. Again, a prolonged recession would cost considerably more than a shorter one.Nationalize the banks and get ready to go whole hog on stimulus. The relative cost of responding fully is much smaller than the cost of an insufficient response that fails. This is particularly true on in the broader economy. The government might eventually be repaid for its capital injections, but no one sends out a compensatory check at the end of a recession. So as we prepare for a major stimulus bill, it's worth keeping in mind this chart that Matt Yglesias posted this morning:
A tax rebate is not, by any means, the most productive use of a dollar of stimulus. You may want a tax rebate because it can be done incredibly quickly, but you also want unemployment insurance and food stamps and infrastructure spending. It would be a real shame if progressives assumed control of the government and then responded to this crisis with a Reaganite package. 
