The Corner

Stimulus in the House

The problem with Jonah’s argument is that congressional Republicans were never really willing to concede the principle that stimulus was needed.  Their tax plan was just a rehash of old hash that was never plausibly linked to the particular economic problems we have today.  I disagree about the payroll tax for various reasons, but at least it would have been focused on the reality of the situation, rather than just being a pointless political exercise.  I believe that reinstitution of the Investment Tax Credit would have been the best Republican alternative. I made the argument here, but got no takers.

An even better approach, in my opinion, would have been to focus on the details of the stimulus plan and argue that its provisions were not very stimulative—even under Keynesian assumptions.  A lot of the money will be wasted without offering any meaningful stimulus.  A strong case could be made that waiting a few weeks while a better plan was devised wouldn’t have hurt and might have helped deliver more effective stimulus.  But for Republicans to make that argument they would have had to concede that the basic principle of fiscal stimulus was sound.

In the end, Republicans preferred to reject the principle of stimulus, thus taking themselves out of the game.  I think that was a mistake, both politically and substantively.

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