Weighing the fiscal stimulus

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A new column for the Financial Times:



In a sudden and doubtless temporary outbreak of willingness to co-operate,
the White House and Congress, cheered on by the Federal Reserve, are
working
on a plan for fiscal stimulus. The effort is welcome – but the
package likely to emerge will make less of a difference than the energy suddenly
devoted to the topic would suggest.


A consensus has formed around the need for a temporary fiscal boost of
between $50bn and $150bn (the median is still trending upward) to be delivered
soon and chiefly in a form that gives cash to people (such as those on low
incomes or unemployed) who will actually spend it. Congressional leaders and the
administration, aiming to decide something by the State of the Union speech on
January 28, are looking at tax rebates, increases in the earned income tax
credit, more money for food stamps and unemployment insurance, and temporary
investment incentives.


President George W. Bush is not insisting that the agreement include an
extension of his earlier tax cuts, otherwise set to expire in 2010. In return
congressional Democrats are suppressing their default distaste for measures to
help business. With a truce declared on those contentious points, a deal can be
done.



You can read the rest of the article here.

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