Much ink, both physical and electronic, has recently been spilled on the question of whether the United States should undertake a second stimulus.
To which there is only one possible answer: we already did a second stimulus.
The first stimulus — the Economic Stimulus Act of 2008 — was signed by President Bush in February 2008. That Act gave families $115 billion in tax rebates and allowed companies to depreciate business investment more rapidly. Overall, the Act reduced taxes and increased spending by $168 billion in 2008 and 2009 (the long-term budget hit from the Act is smaller — about $124 billion over ten years — because the corporate tax reductions deferred tax payments rather than eliminating them.)
Those were the days before the collapse of Lehman (heck, it was even before the collapse of Bear Stearns) when policymakers were rightly worried about a weak economy, but $168 billion seemed like a lot of money.
The second stimulus — the American Recovery and Reinvestment Act of 2009 –was signed by President Obama in February 2009. That Act increases spending on a host of programs, including infrastructure, state assistance, and extended unemployment insurance. It also created the Making Work Pay tax credit, among other tax reductions. The Act is usually described as a $787 billion stimulus, with ten-year spending increases of $575 billion and tax reductions of $212 billion. The reality is a bit more complex, however. On the one hand, the Act provides somewhat more stimulus than the headline figure; for example, there are about $810 billion in spending increases and tax reductions during the first seven years. On the other hand, the stimulus takes time to phase in; during fiscal 2009, for example, the estimated stimulus is about $185 billion.
The question we face today is whether to enact a third stimulus, not a second one. I will have more to say on this in the future. For now, I think the Obama administration has it exactly right, indicating that it’s premature to enact a third stimulus, but their economic team is closely monitoring the situation.
They can market it with the slogan, “The third time is the charm.”
[...] Donald Marron [...]
[...] of brevity, I used dollar amounts that aren’t completely apples-to-oranges. As noted in my previous post on this topic, the $168 billion amount for the first stimulus reflects the gross amount of stimulus in the first [...]
[...] Refunds have also increased (denoted by a larger negative figure — i.e., larger cash outflows). Refunds also spiked in the middle of last year due to the first economic stimulus. [...]
[...] For a discussion of why the $862 billion figure (formerly known as the $787 billion figure) is not really the right measure of stimulus, see this post. [...]
[...] For a discussion of why the $814 billion figure (formerly known as the $862 billion figure or the $787 billion figure) is not really the right measure of stimulus, see this post. [...]
[...] For a discussion of why the $814 billion figure (formerly known as the $862 billion figure or the $787 billion figure) is not really the right measure of stimulus, see this post. [...]