Stimulus plan supporters are using words such as “jumpstart” and “shovel-ready” to create an aura of rapid and productive action from their $787 billion bill heading for passage in Congress.
The CBO just released some details of the plan, which includes $575 billion in new spending and $212 billion in (mainly silly) tax cuts. Even if you believe in Keynesian jumpstart theory, a full 41% of the spending ($236 billion) will not occur until 2011 and after. Thus, even from a Keynesian perspective, $236 billion ought to be cut out of the package because it won’t be spent on ”shovel-ready” projects.
And by the way, even according to the CBO’s Keynesian-style model, the stimulus package will produce a negative effect on GDP in 2014 and all subsequent years.
In the end, if didn’t really matter what even Congress’s own economists said — today’s politicians simply love to spend money and will jump on any excuse to do so. It is an obsessive-compulsive disorder for which we have yet to find a cure.