A Second Stimulus

[Babylonsister]

http://economix.blogs.nytimes.com/2010/1...-stimulus/

A Second Stimulus
By DAVID LEONHARDT

The apparent deal over the Bush tax cuts highlights why the Democrats probably had to accept the extension of all the Bush tax cuts. No politician is likely to use this word — at least no Democratic politician — but the deal amounts to a second stimulus bill.

Consider the following two situations:

1. President Obama and Congressional Democrats refuse to extend the tax cuts on income above $250,000. Congressional Republicans refuse to extend any tax cuts unless all cuts are extended. So all of the Bush tax cuts expire on Dec. 31. Congress and the White House spend weeks or months fighting over the issue, accomplishing little else and potentially damaging consumer confidence and business confidence. Eventually, the two parties come to some kind of compromise. It restores most, but not all, of the tax cuts. The cost to the budget — that is, the amount of money pumped into an ailing economy — is about $400 billion over two years.

2. What actually seems to be happening: Democrats and Republicans agree to extend all the tax cuts and also agree to an extension of unemployment benefits, a cut in the payroll tax and, according to my colleagues, “continuation of a college-tuition tax credit for some families, an expansion of the earned income tax credit and a provision to allow businesses to write off the cost of certain equipment purchases.” The amount of money pumped into the ailing economy: about $900 billion over years.

Subtract the $400 billion cost of the Bush tax cuts. Subtract another $140 billion or so, which is the cost of extending the Alternative Minimum Tax patch (and almost certainly would have happened regardless). You’re then left with more than $300 billion in net stimulus over two years. And while that sum will not be enough to fix the economy all by itself, it is serious money. The original stimulus bill cost about $800 billion, and most of the money will have been spent in the first two years after its passage.

This deal looks an awful lot like a second stimulus.

more...

http://economix.blogs.nytimes.com/2010/1...-stimulus/

[Ikonoklast]

The line item for accelerated depreciation for capital improvements in equipment purchases will be a huge incentive for businesses to invest in their physical plant.

That one item is a pretty big stimulus in itself.

People make that stuff...employed people.

[CraigGrant]

ask any family who gets EIC and they will tell you how big a stimulus it is.

[atomic]

(12-07-2010 07:26 AM)Babylonsister Wrote:  http://economix.blogs.nytimes.com/2010/1...-stimulus/

This deal looks an awful lot like a second stimulus.

Hmmmm. You may be on to something.