By Arnold Kling
Douglas Elmendorf, the head of the Congressional Budget Office, writes,
CBO estimates that enacting the bill would increase federal budget deficits by $169 billion over the remaining months of fiscal year 2009, by $356 billion in 2010, by $174 billion in 2011, and by $816 billion over the 2009-2019 period.
I assume that this is “static scoring,” meaning that it assumes nothing in terms of feedback from the economy to the budget. Fiscal year 2009 ends on September 30,, 2009. Fiscal year 2010 starts on October 1, 2009 and ends on September 30, 2010.
Larry Summers famously argued for a timely, targeted, and temporary stimulus. This looks like something that is not timely, with only about 20 percent of it getting into the system in the next 8 months. It does not seem temporary, given that over one-third of it ($291 billion) will kick in at least 21 months from now.
Back in the 1960’s and 1970’s, Keynesian economists talked about a temporary investment tax credit as the ideal fiscal stimulus. You tell businesses, “invest this year, and you get a tax credit. Wait until next year, and the tax credit goes away.”
An investment tax credit is not the stimulus I’m advocating today. I prefer Bryan Caplan’s idea of cutting the employer contribution to payroll taxes.
But an investment tax credit has the virtue of being timely and temporary, and hence it qualifies as a stimulus idea. The bill going through Congress is not. It is a Galbraithian transfer from the private sector the government.
UPDATE: Greg Mankiw gives the year-by-year breakdown.