Monday, July 19, 2010

Time Horizons and the Stimulus

Martin Neil Baily, from the left:
The key priorities with the stimulus package were to make sure that it went out quickly and that it was large enough to increase total spending. With a total package at $862 billion spent mostly in 2009 and 2010, it met those goals. With only limited guidance from the White House and individual members of Congress each wanting money to come to their district or state, the details of the package were a mess. It was a lot of money, and it did little to deal with longer-term problems, such as the weak infrastructure and an over-dependence on fossil fuels. However, it did contribute to spending at a time when the collapse in aggregate demand was threatening possible depression.

Michael Boskin, from the right:
The stimulus has had a small, short-term impact for very large long-run costs; every dollar of the $862 billion of debt will mean a dollar plus interest of higher future taxes, which will slow future growth. It did prevent--more accurately, delay--some pay cuts and layoffs for state and local government employees, but it had only a small impact on consumer spending and business investment. It has delivered a lot less than the Obama Administration claims.

Sorry, I keep bring this up, but it keeps popping up again and again. The individual's discount rate is the primary determinant of their political preferences.

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