The WSJ has a story today about growing calls for another stimulus package. Bruce Bartlett has a column in the FT arguing that we don’t need one. Bartlett’s main point is that only a fraction of the stimulus money has been spent yet, and that fraction has been consisted mostly of what, according to the Administration’s own estimates, are the least effective forms of stimulus:
Tax cuts and government transfers are slow to have an effect and have a low multiplier, raising GDP less than $1 for every $1 increase in the deficit even when fully effective after two years.
By contrast, government purchases stimulate growth much more quickly and have a higher multiplier, raising GDP by $1.57 for every $1 spent. Unfortunately, the low-impact spending has been the fastest to come online while the high-impact spending is dribbling out very slowly.
Bartlett thinks we just need to give the stimulus package more time. He’s probably right about that. It’s possible, though, that he’s wrong—that the economy is deteriorating so fast that even more stimulus is needed. I wonder if Congress could enact some sort of contingent stimulus legislation: If the unemployment rate passes 11%, then $XXX billion goes to some predetermined range of programs. If it doesn’t, then the money remains unspent.
Naaah, that’d be too sensible.
Finally, while we’re talking stimulus, Michael Scherer has an entertaining piece in the new TIME about Joe Biden’s efforts to keep stimulus dollars from being spent on projects likely to be made fun of on Fox News. (No frisbee golf facilities!)
Update: The Big Money’s Chadwick Matlin is going on a month-long road trip to watch the stimulus in action. Big fun.