Stimulus Math


STIMULUS MATH….Jonathan Stein points me to a Washington Post story telling us that Barack Obama has decided to ditch the $3,000-per-job tax credit that was part of his original stimulus proposal. Good. It was a dumb and almost certainly unworkable idea. But there’s also this:

Obama advisers said further adjustments may be made to the president-elect’s tax priorities, including to a proposed $500 payroll tax credit for individuals. Many Democrats have criticized Obama’s idea of distributing the benefit over 12 months, saying it would amount to about $20 per paycheck for workers who are paid every two weeks. They would prefer to distribute the credit over a shorter period.

I’m basically with Obama here. But I’d actually suggest something different: make the credit bigger, pay it out over two years, and have it automatically decline. For example, how about $2,000 paid out quarterly over two years? The credit would be $400 in the first quarter, $300 in the second and third quarters, and so on until you get down to $100 in the eighth and final quarter. This front loads the stimulus now, when it’s most needed, keeps it going throughout the expected length of the recession, and makes it predictable enough that people know they can count on it. It might also strike a good balance between the amount of the stimulus that gets spent vs. the amount that gets saved. Worth a thought, anyway.

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