How Bad Is It?

Update: Steve Bates and Fallenmonk aren’t impressed, and, not only is Distributorcap not impressed, he remembers having to pay taxes on the last rebate. In addition 56% of the 60K people who have clicked on the CNN quick poll think it’s too little, too late.

Kevin Drum on the stimulus package:

Bottom line: I doubt that this plan is going to provide an awful lot of stimulus. But it might do a bit of good, and certainly won’t do any harm. In today’s world, that counts as a win.

Paul Krugman on Who Gets Stimulated:

I’d guess that the top two quintiles [note: a quintile=20%] are unlikely to be liquidity-constrained, so the rebate will have little effect on their spending. But they get 58% of the money. The bottom two quintiles, which are the place you’d most expect to have an impact, get only 21% of the money. Split the difference on the middle quintile, and you’ve got a plan where around 2/3 of the outlay is likely to be ineffective.

Center on Budget and Policy Priorities offers analysis:

…for each dollar spent on extended UI [unemployment insurance] benefits, $1.64 in increased economic activity would be generated. For each dollar in increased food stamp benefits, $1.73 in new economic activity would be generated. No other options rated as high…

…for each dollar in “accelerated depreciation” — the main business tax cut in the package — only 27 cents of increased economic activity would be generated…

…The business tax cuts also would cause states to lose at least $4 billion in state revenue, due to linkages between federal and state tax codes.

As for not doing any harm, Kevin, the California income tax is tied to the Federal tax, so the state budget deficit is about to get worse and the lay offs in the state government will further depress the economy.

Of course, everyone realizes that these rebates are taxable income and have to be reported on their 1040 for next year… when the Shrubbery is gone.

This plan is turning out to be pretty much the worse possible choice that could be made, and will probably deepen the recession, not to mention increasing the deficit. Doing nothing is looking like a much better alternative.