Proportions

The news leaking out on the Obama stimulus package is beginning to be interesting. The talk now is of a package that could approach $800 billion. It is estimated that 40% of that will be tax reductions. To put those numbers in perspective, that would amount to something in the range of $300 billion over two years or about $125 billion larger than the reductions made in the 2001 package first offered by the Bush administration or about $70 billion larger than the money included in the first two years of the 2003 package. From any perspective the size of the tax part of the package, indeed it could be said of the whole package, is larger than expected.

The Tax Policy Center (a joint project of Brookings and the Urban Institute) said in a post called "Lots of Buck not Much Bang" on the proposal "The research on the last three rebates suggests that people spent between one-third and one-half of the money within nine months of the time it got into their pockets. If Obama pumped $150 billion into these tax cuts and 40 percent, or $60 billion, got spent, the impact on the U.S.’s $14 trillion economy would be real, though modest." The comments on the business side of the proposal suggest that they created "head throbbing" in the analyst. The conclusion to the piece is dour "Let’s hope that many of these trial balloons crash to earth long before they have a chance to become law, though I fear they won’t."