Sunday, January 27, 2008

This Is Rich

From the Real Time Economics Blog:

Huckabee and Paulson Spar over Stimulus Plan
Republican presidential hopeful Mike Huckabee accused President Bush and the House of Representatives of missing the point with their new emergency anti-recession plan, including $100 billion in payments to individuals and $50 billion in tax breaks to get businesses to invest.

“The problem I have is that what we are really doing is borrowing about $150 billion from the Chinese, which is where this money has got to end up coming from,” Huckabee said on CNN’s “Late Edition” Sunday.

“Then we’re going to give rebates to taxpayers, and that’s great. - I’m glad,” Huckabee continued. “But what will most of them do with it? They’re going to buy things that were imported from China.”

“So I have to ask,” he added, “whose economy is being stimulated the most?”

The former Arkansas governor said a better plan would be to provide an infusion of federal dollars to repair and replace crumbling bridges, airports and other infrastructure.

Huckabee has a reasonable argument, to a point. If the purpose of the stimulus package is to prevent GDP growth from turning negative by boosting consumption, then the import share of the incremental consumption (relative to total consumption) has to be considered. And as I've argued before, he is right in noting that this deficit spending on simple consumption when public infrastructure might be a more sensible addition to the budget.


eightnine2718281828mu5 said...

Infrastructure projects can take years to spin up; just out of curiousity, maybe a tuition subsidy would provide a more immediate benefit.

Plus a tuition subsidy would encourage the unemployed to go back to school, which would keep them out of the labor pool during the downturn while preparing them to take advantage of the next upswing in the business cycle.


Andrew Samwick said...

Interesting ideas. One response to each:

1) Infrastructure projects can take years to spin up, if you have to start from scratch each time. This is why I stressed the importance of a capital budget, in which this planning is done ahead of time. So the projects would be known in advance. It would still take time to move the resources, but I'm willing to live with that constraint to keep this suggestion from breaking budget balance.

2) As an alternative to complicated things, like Trade Adjustment Assistance, I certainly favor a refundable tax credit for retraining. Junior colleges and technical schools already seem pretty well set up to accommodate this.

Thanks for your comment.

A Red Mind in a Blue State said...

Not all infrastructure projects will take time to get going-- many local and state projects are ready to go, some have started but are being stretched out to meet local budgetary constraints. If the money were designated for infrastructure, men and women who are hired for a three or four year project are much more likely to buy a car, build an extension on a house--or qualify for a mortgage or a refinance. And the money stays here.

Or, if we are spending fantasy money, how about a series of energy-saving projects-- putting solar panels on every flat roof we can find? Replacing all stop lights with LED's? Tax credits for energy efficient roofs, windows, appliances?

At least that way the benefits of the borrowed and spent $$ last longer than an flat screen TV.

PGL said...

Greg Mankiw rightfully puts you into a noble coalition - the Coalition Against Fiscal Stimulus. Over at Angrybear, i try to qualify what the coalition members are really saying and then beg to be invited into it (as well as wonder whether DeLong and Krugman also belong to the noble coalition). Just updated my post a couple of times to suggest that Menzie Chinn and Mike Huckabee also belong in the noble coalition. Alas, the DC decision makers appear to be ignoring all of us.