Stimuli Don’t Work
Posted by Matt Zeitlin on January 23, 2008
The Financial Times reports that the Congressional Budget Office has found that any tax rebate will take six months to have any impact on consumer spending or the economy:
Peter Orszag, whose agency provides impartial fiscal and economic advice to Congress, said that it would be a “major challenge” to send out tax rebates before June as the IRS is tied up with annual tax returns. “It is remarkable the world’s leading economic power cannot get cheques out faster than that,” he told a hearing of the Senate finance committee.
He added that experience with the 2001 tax rebate suggested the full effect of the move
The consensus among policy pros and economists seems to be that, in theory a stimulus could be effective, but that any congressional, fiscal stimulus is likely to be ridden with special interest hand-outs, targeted for votes and political support and will not be big enough or quick enough. It seems to be a flaw in our political system that the professionals can all agree on something — literally from Robert Reich to Kevin Hassett - and yet it seems inevitable that some sort of stimulus package will be approved by Congress. I guess the risk of having a system that is even remotely democratic is that handing out free candy, so to speak, will always be a temptation.
