“Too little bang for the bucks”

That’s how Robert Samuelson describes the economic stimulus package currently before Congress. His argument is that a spending package this massive can only be defended on the grounds that, with the economy so weak, immediate stimulation is required. This entails a “front-loaded” package — one that gets money into the economy right away.

Samuelson finds that the current legislation fails this test. The Congressional Budget Office estimates that only 21 percent of the money will flow to the economy this year, with another 44 percent to follow in 2010. A better approach, says Samuelson, would be “to give more money to states and localities, and order them to spend it.” Most of these entities “would plug deficits, avoiding progam cuts and layoffs” thus providing an almost immediate “bang.”

Samuelson also notes that a $7,500 tax credit for any home buyer in the next year (and not just for first time buyers, as in the current bill) might reduce bloated housing inventories, while a $1,500 tax credit for car or truck purchases might revive sales in the automotive industry.

I question whether these forms of stimulus are justified given the cost. But it’s difficult to disagree with Samuelson that if we’re going to break the bank to stimulate the economy, there is no excuse for not “front-loading.”

Why, then, have the Democrats not done so? Samuelson says it’s down to politics:

The decision by Obama and Democratic congressional leaders to load the stimulus with so many partisan projects is politically shrewd and economically suspect. The president’s claims of bipartisanship were mostly a sham, as he skillfully maneuvered Republicans into a no-win position: Either support a Democratic program, or oppose it — and seem passive and uncaring.

As a result, Samuelson concludes, the stimulus package fails to address adequately the economy’s present needs while also worsening the long-term budget outlook.” Again, it’s difficult to disagree with Samuelson.

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