Then an Obama economic adviser responds :
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.And then Noam Scheiber claims that Obama's really making a brilliant political move:
By agreeing to channel up to 40 percent of the stimulus through tax cuts, Obama is essentially calling the GOP's bluff. He's saying, "You guys are making a principled argument that tax cuts can be a more efficient way to stimulate the economy. I'm accepting that argument in large part. So rather than spend a lot of money helping low- and middle-income people, I'm going to get that money to them via tax cuts."
At which point he's kind of backed them into a corner. If the GOP accepts, then great. If they turn around and say, "Well, when we said tax cuts, we actually meant tax cuts for wealthy people, not for low- and middle-income people," then it becomes blindingly obvious that they weren't making a principled argument at all. They were trying to shake Obama down on behalf of their rich cronies.
1 comment:
Maybe I am out of my league here to dispute the logic of a "Senior Economic Adviser", but it seems to me that the marginal utility of each successive dollar spent on infrastructure spending is equal to the utility of the previous dollar, assuming that there are enough infrastructure projects justified by a certain return on investment standard. I can understand if they don't have enough "shovel ready" projects to spend the entire $675 mil, and therefore need to spend the rest as tax cuts. However, each dollar from a tax cut that is saved is a dollar that is not "stimulating" the economy in the short term. The primary goal of the stimulus package is to stimulate consumer demand in the short term because consumer spending accounts for over 70% of our economy. Consumer demand will not go up for those who don't need a tax rebate and would just save the entire check.
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