. . .at least let’s have one that stimulates the economy. So says economist Martin Feldstein , who maintains that much of the $800+ billion we are going to spend will have little stimulative value. Instead, he has some suggestions:
Why not a temporary refundable tax credit to households that purchase cars or other major consumer durables, analogous to the investment tax credit for businesses? Or a temporary tax credit for home improvements? In that way, the same total tax reduction could produce much more spending and employment.
Postponing the scheduled increase in the tax on dividends and capital gains would raise share prices, leading to increased consumer spending and, by lowering the cost of capital, more business investment.
On the spending side, the stimulus package is full of well-intended items that, unfortunately, are not likely to do much for employment. Computerizing the medical records of every American over the next five years is desirable, but it is not a cost-effective way to create jobs. Has anyone gone through the (long) list of proposed appropriations and asked how many jobs each would create per dollar of increased national debt?
His bottom line: A plea for lawmakers to not be in such a hurry, to plan carefully, to not be in such a rush that we waste $800 billion.
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