Meanwhile, also in response to my post on the permanent income hypothesis, Matt Yglesias writes that it isn't true. I think that's right--or rather, that it isn't perfectly true, and that its trueness varies across time. Peoples' ability to project their future income varies, and so does how much focus they put on projecting that income, relative to current flows.
It wouldn't necessarily bolster the case for stimulus to assume that people will not correctly estimate the costs--people could overshoot as well as undershoot, meaning that they'd actually oversave to pay for future taxes. What matters is, first, are people paying more or less attention to future taxes than they used to, and second, are their estimates more or less optimistic than they used to be?
It's armchair sociology, of course, but I'd argue that people have suddenly become much more focused on estimating their future income and expenses, rather than living paycheck to paycheck--hence the suddenly renewed interest in savings. They've also, empirically, become a lot more pessimistic--at least, if we can count consumer confidence indices as empirical evidence. That will impact how much of the stimulus they save. This does not mean that there will be no multiplier--only that it will be lower than in an era less future focused.