When it comes to stimulating the economy, what works? Much can be learned by examining a previous attempt, the Economic Stimulus Act of 2008, says John B. Taylor, a senior fellow at the Hoover Institution. For example:
- The major part of the 2008 stimulus packaging was the $115 billion temporary rebate program, targeted at individuals and families that phased out as income rose.
- The argument for these temporary rebate payments was that they would increase consumption, stimulate aggregate demand, and thereby get the economy growing again.
- Yet, the rebate did little or nothing to stimulate consumption, overall aggregate demand or the economy.
So what could Congress and the Obama administration do to give the economy a real boost? The following fairly bipartisan measures are worth considering:
- Pass a law keeping all income-tax rates where they are now, effectively making current tax rates permanent; this would be a significant stimulus to the economy because tax-rate increases are now expected on a majority of small business, capital gains, and dividend income.
- Enact a worker's tax credit equal to 6.2 percent of wages up to $8,000 as the president proposed during the campaign, and make it permanent.
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image toon - mny = Stimulus garden yields no Jobs
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