Remember those numbers showing how much economic stimulus you get for each dollar you spend in different sectors? No? That's probably because I didn't post them in convenient graph form. But via Ethan Pollack at EPI, I'm going to rectify that right now:
The basic way to think about this is that you get less stimulus when you focus on the righ, and more when you focus on the poor. That's pretty intuitive. If you don't have enough money to make ends meet, and you get some money, you spend it now. If you have plemty of money, and you get some money, you put it away, That's not very stimulating. As such, tax cuts which primarily focus on the well-off sit at the bottom of the chart, tax cuts for the working class are near the top (like the payroll tax holiday), and things like infrastructure spending and food stamps lead the way. On a related note, EPI's Jared Bernstein recently gave testimony to Congress on the need for a new stimulus bill. As context, remember that a lot of the talk around stimulus focuses on length: If the recession will be long, that leaves time for infrastructure. If it will be short, that's only time for tax cuts. As jared suggestsm though, recent history suggests length:
The basic way to think about this is that you get less stimulus when you focus on the righ, and more when you focus on the poor. That's pretty intuitive. If you don't have enough money to make ends meet, and you get some money, you spend it now. If you have plemty of money, and you get some money, you put it away, That's not very stimulating. As such, tax cuts which primarily focus on the well-off sit at the bottom of the chart, tax cuts for the working class are near the top (like the payroll tax holiday), and things like infrastructure spending and food stamps lead the way. On a related note, EPI's Jared Bernstein recently gave testimony to Congress on the need for a new stimulus bill. As context, remember that a lot of the talk around stimulus focuses on length: If the recession will be long, that leaves time for infrastructure. If it will be short, that's only time for tax cuts. As jared suggestsm though, recent history suggests length:Recent history suggests that it is a mistake to think that labor market slack will no longer be a problem when the recession officially ends...Much of the current recession/stimulus debate has stressed that recent recessions—the ones in 1990-91 and 2001—were both mild and short-lived, and perhaps the next recession will follow the same pattern. It is critical to recognize that these claims are based solely on real output growth, and not on job market conditions. The allegedly mild 2001 recession, wherein real GDP barely contracted, was followed by the longest “jobless recovery” on record. Though real GDP grew, payrolls shed another net 1.1 million jobs. The unemployment rate rose for another 19 months and for almost two years for African-Americans. The pattern was similar, though not quite as deep, after the early 1990s recession...policy makers are likely to give greater consideration to working families whose employment and income opportunities are significantly weakened as unemployment rises and job growth contracts. Thus, from a stimulus perspective, these investments will be still be relevant and needed well after the recession is officially ended.
