Tuesday, March 3, 2009

The Real Stimulus Package

Over at Think Progress, Matt Yglesias has a good piece on what the final stimulus actually looks like. While some commenters got the colors wrong - I think there could have been a yellow in there instead of two greys - the basic idea is this. For all the howling by Republicans about the stimulus, the single biggest piece at approximately 32% is made up of . . . wait for it . . . tax cuts! Yes Sir, step right up, because Democrats are actually adopting Republican economic ideas, even after those ideas have been debunked by history. So, when they whine as they will about eing shut out, send them this graph and ask them to have Michale Steele apologize for their hystrionics.

And while we're at it, ponder this from teh Center fro American Progress study Matt cites:

"While Keynesian hasn’t been disproven, supply-side economics has. President Bush’s economic advisors assured the American public in the early 2000s that the president’s massive tax cuts would generate economic growth and create jobs. This classic supply-side policy intervention did no such thing. The 2000s economic recovery was the weakest of all post-World War II recoveries in terms of growth in investment, GDP, and job creation."

As I've said before, supply side responses to demand side issues just don't work.


Mike at The Big Stick said...

Wasn't the New Deal basically one big experiment in Keynesian policies? How about LBJ's Great Society?

Philip H. said...

Yes, I think we tried Keynsian policies in the the New Deal, though many people I've read think it wasn't big enough. The Great Society probably wasn't strictly Keynsian - but then again I haven't got a good handle on how Keynes felt about dealing with poverty.
These days, I'm more prone to looking at this response to the economic crisis the samy way as Paul Krugman did in his 28 Dec. 2008 column:
"What’s been striking me lately is how many people who talk and write about macroeconomics just don’t get Keynes’s essential point — the fact that economies can suffer from insufficient aggregate demand because people want to acquire liquid assets rather than real goods."

WHich means, as I noted earlier, this is now a demand side problem.