ataxingmatter

What should economic stimulus accomplish?

As the Senate continues to ponder its supplement to the economic stimulus package expected to be enacted sometime soon, it is worth thinking about the reasons why an economic stimulus is needed.  We've had seven years of a trend of budget deficits because of hundreds of billions in spending for a unilateral war in Iraq and because of a series of revenue reduction bills that gave the best off amongst us the biggest tax cut. 

Our most reason tax bill was just more of the same--an AMT "patch" that cost the fisc tens of billions of dollars to provide "relief" mainly to those in the $200,000 to $500,000 bracket.  The bill could have directed the "patch" just to those in the lower and lower middle class rather than to the upper crust of the middle class.  It could also have paid for itself by correcting a monumental unfairness in the tax system--the treatment of the "2 and 20" mode of compensation for managers of hedge funds and equity partnerships and other partnerships, where managers get paid for their work mostly at capital gains rates and with deferral to boot because of offshore arrangements.  But Congress passed the "patch" to the revenue collection without patching the revenue leakage from hedge and equity fund managers. 

The stimulus package as designed in the House isn't much better.  It does try to get some much needed funds into the hands of Americans in the lower income brackets, though it doesn't provide any funds for seniors who are living, many of them, on very meager social security allowances.  It gives too much money to people who already have a good bit of money, since the House bill gives a refund of $1200 per couple (plus $300 per child) to families that earn as much as $150,000.  The Senate Finance Committee bill considered no cap whatsoever, and then has thought better about that.  But these funds won't really jumpstart the economy--they'll just add a little bit of spark to the flagging consumer end of the economy, to the extent that families don't just save or use the funds to pay off debt (probably the most likely use).  That's why it is important for the Senate to include an extension of unemployment benefits.  Even better, they should include public infrastructure project funding--for roads, bridges, schools--that can create jobs and build long-term assets in localities that need them.

The reason we need to do these things isn't because the stock market has been volatile, even with the Fed's infusion of liquidity by dropping the interest rate 1.25% within a very short period of time.  The reason we need to do these things is not because we need to worry about CEOs and managers and big shareholders who hold a huge proportion of the assets (especially of the financial assets) of the country.  We need to do these things because the ordinary person in the US is suffering.  The January report from the Bureau of Labor Statistics tells the tale that we need to listen to--wages as adjusted for deflation actually declined by about 1% last year (between December 2006 and December 2007).  So while the "economy" might have grown, its growth benefited only those at the very top (who have paid LESS in taxes because of the series of Bush tax cuts).  It did not benefit the rest of us.

OMB Watch has a useful graph showing wage data over the period from 2001 through 2007, at this link.  It shows a significant downward trend in wages.  So if anyone wonders why average Americans are talking about the economy at the breakfast table and feeling worried about making ends meet, there is a good explanation.

Jobs data--ie, the number of new jobs created--is supposed to be released tomorrow.  Economists are noting that they expect to see a number above 100,000, compared to the weakling number of 63,000 in the last report.  Either way, we know we are not doing enough to create jobs and that the jobs of ordinary Americans don't pay enough.  A stimulus package should take that into account, and include public infrastructure projects that can make a real difference, long and short term.

Economic stimulus package: Senate Finance Committee action

The Senate Finance Committee today considered a Senate stimulus package, reinstating income caps to the rebates (still higher than the House, with rebates available to individuals with income up to $150,000 and couples up to $300,000) and adding energy incentive measures supported by Sen. Grassley, including an extension of the section 45 credit for electricity produced from renewable resources and other Code provisions incentivizing energy-efficient commercial buildings and homes.  Grassley has acknowledged the addition of unemployment benefits was a "big sticking point" but necessary to get a Senate Finance Committee compromise, according to BNA Daily Tax "RealTime" 1/30/08 at 6:17pm.

Republican Senator Kyl attempted to include an AMT patch in the stimulus bill, but that was rejected, as a solid majority of the Senate Finance Committee, like the Bush Administration, considers the AMT best left for separate consideration.

According to the BNA report, Senator Reid has indicated that the Senate Finance bill may be brought to the floor of the Senate tonight, though at least some Republicans want the Senate to act on the FISA bill before acting on the stimulus.  (My personal view on expansion of warrantless spying is that the Senate shouldn't approve it at all; releasing the phone companies from liability for breaking the law doesn't seem to me like a very good idea either.  I don't much like the fact that our new attorney general can't bring himself to admit that waterboarding is torture and against all fundamental American principles. But I'm just a tax lawyer, so I won't be commenting on that.)  Others want the Senate just to pass the House bill, without the modifications in the Senate.

The JCT's description of the Chairman's mark under discussion at Senate Finance today is at this link and the JCT's estimate of the budget effects of the Chairman's mark is at this link.

Private Debt Collection of Federal Taxes: Letter from Senators in advance of Shulman Confirmation Hearing

The government has been experimenting with contracts for private debt collection in respect of federal tax liabilities.  As I reported recently, the National Taxpayer Associate is not in favor of the project, and has spoken out against it quite strongly.  The recent report to Congress reviews the reasons that private debt collection is problematic, including now the evidence that privatization of this quintessentially government function has not yielded the substantial revenue benefits promises but rather has had meager success (actually losing money when the costs of setup and maintenance of the program are considered!).

A number of Congresspersons are working to reverse the program legislatively.  Several signed a letter, dated January 28, 2008 and available on BNA at this link, to Max Baucus as Chair of the Senate Finance Committee upon the occasion of today's confirmation hearing for Doug Shulman as new Commissioner of the IRS.  The letter notes the signers' lack of support for the private debt collection program for reasons including its apparent failure as a cost-effective reveneue collection measure.  The signers indicate that this is an issue that they expect to pursue in the hearing.

The hearing took place today.  Shulman's prepared testimony, which does not mention the private debt collection program, is available at this link . Also available at the Finance Committee website are the statements of the ranking majority and minority members.

Economic stimulus package: House bill; initial Senate plan

The economic stimulus package deal in the House is now available for review. 

1) Language of H.R. 5140

2) JCT Technical Explanation

And the initial plan in the Senate, which is scheduled for markup Jan 30, is described by the JCT>

3) JCT Description of Senate Biill Scheduled for Markup on Jan 30

Both the House and Senate provide for "prebates" and enhanced expensing under section 179.  The Senate version of the business incentives involves mutually exclusive options, including the expensing, bonus depreciation and extended NOL carrybacks;  the House version permits both expensing and bonus depreciation, but does not include an NOL carryback extension.  The Senate's version of bonus depreciation requires the 50% expensing permitted in the House bill to be distributed over two years instead of lumped in one year.  The Senate also adds to the stimulus package enhancement of unemployment benefits.

edited 1/30/08

Economic stimulus: foreclosures and banking issues

Today's BNA banking report (Vol 90, No. 4, at 148) discusses Senator Dodd's call last Wednesday for new federal programs to deal with the widespread foreclosures that are threatening cities' livelihoods across the continent.  Mortgage Purchase Corporation Among Features of Dodd's Stimulus Proposals.  He has four proposals related to foreclosure problems:

1. create a new federal corporation, capitalized with $10-20 billion, that will be charged with purchasing distressed mortgages for persons in danger of foreclosure, and modifying the loans to provide a 30-year fixed rate mortgage;
2. temporarily increase the loan limit for Fannie Mae and Freddie Mac purchased loans (currently limited to $417,000) to respond to the current skyrocketing rates for such "jumbo" loans, a measure also supported by New York's Senator Charles Schumer and Treasury Secretary Paulson (who has acknowledged that a permanent change doesn't make sense, since it is not related to the two loan corporations' purpose of increasing the stock of affordable housing), as well as Barney Frank (who has commented that a proposal to permit increase up to 125% of the media house price in the mortgaged home's locale has White House approval);
3. increase funding for state purchases of foreclosed properties by $10 billion; and
4. modernize FHA (this would likely also include an increase in the cap on the size of loans).

The first and third of these proposals seem right on target.  Assistance to homeowners faced with distressed loans should be instituted with appropriate limits so that it helps out lower and lower-middle income taxpayers who have distressed loans on their principal residence. 

The third should probably be more generous, because this is a critical part of cities' ability to regenerate when faced with economic distress by preventing steep declines in property values from spilling over from one neighborhood to the next.  Including this kind of aide in an economic stimulus package would be very beneficial to cities like Detroit, Sacremento and other areas hit with very high rates of foreclosure by permitting them to prevent those foreclosed properties from sitting in abandonment and instead using them for low cost rentals or development, as appropriate to the context.  The US Conference of Mayors, meeting in DC Jan 23-25, were adamant in the importance of federal assistance in dealing with the mortgage crisis.  See the same BNA Banking Report, US Mayors ask Congress to act now to help with Foreclosures, p. 152, which has very similar proposals in their "45-day agenda".

The second and fourth proposals seem less related to an economic stimulus, though they may be necessary to help the economy transition to lower home values. They will primarily benefit relatively high income taxpayers (since not many people in the middle class buy a home worth more than half a million, except in areas where house prices have skyrocketed in part because of the very low cost of credit) and will tend to make it easier to maintain high prices on housing in areas where the housing market has been in a bubble. 

The banks' role in the economic downturn

  The Fed cut the discount rate by three quarters of a percent, its largest one-day cut ever, and yet the stock markets are still nervous about the potential for a recession in the US that could affect the entire world, as demand for products drops back. In spite of the Fed cut and the tentative agreement for a $150 billion stimulus package (essentially a tax cut for the middle class and for businesses), Asian markets reacted Monday to continuing worries about the buoyancy of the US economy by heading down again (see this item in the New York Times late Sunday). 

One of the questions that needs to be asked is how much responsibility the federal government's deregulatory emphasis over the last seven years may have for the credit crunch and housing crisis.  In New York, Attorney General Andrew Cuomo is looking into the subprime mess and finding that banks had become extraordinary lax in giving loans at the same time that those hired to vet the loans were asked to look at smaller samples than in the past.  Clayton Holdings, one of the firms that analyzed the quality of home loans for investment banks, is looking at the  risk that may have been glossed over in the rush to securitize those loans.

Robert Shiller writes for the New York Times "economic view" that the lesson learned in the Great Depression was the importance of appropriate regulations. Appropriate regulatory systems improve confidence in markets and improved confidence results in better functioning.  So creation of the FDIC, SEC and other regulatory agencies played a significant role in bringing markets back. 

Today, we have a system of "shadow banking" that is unregulated and uninsured.  Shiller mentions the many trillion-dollar commercial paper market, in which a few big issuing corporations like GE issue asset-backed commercial paper that helps create market liquidity.  But you could also call the various mortgage brokers another form of shadow banking.  Mortgage brokers and lenders are  separated from the borrowers they lend to in ways very different from the local bank that would make mortgage loans only on homes within its local region.  These mortgage brokers make the deals then the lenders sell the paper into securitization vehicles as quickly as they issue it.  That separation creates considerable problems in a market disruption such as the one facing housing today.  People in trouble have difficulty finding someone on the phone to talk to who cares at all about their individual situation. 

Ben Stein, in the same Sunday New York Times, talks about the enormous power exercised by traders in the big investment banks.  See Ben Stein, Can Their Wish be the Market's Command?, NY Times, 1/27/08. He notes that losses of about $100 billion on subprime loans have translated into losses in the US markets of about $2.5 trillion in recent weeks.  Traders, he says, "can turn the world upside down, make governments tremble, give central bankers colits and ruin the lives of ordinary men and women saving for their children's college education or their own retirement."  This is because traders are trading to trick other traders and small retain investors, they "generate data and rumore to support their positions, and to make money.  More than that, they trade to support the way they want the market to go."  Hedge funds, with massive pools of assets, can move the market quickly by selling assets. 

Whatever the solution to our current financial crisis, it is clear that it is not something that can be resolved merely by more Federal Reserve rate cuts.  Gretchen Morgenson, O Wise Bank, What Do We Do? (No fibbing now), NY Times, Week in Review, !/27/08, notes that the big banks had been huge profit generators for so long that complacency had set in.   As James Grant puts it in "Paying the Price for the Fed's Success," "there is nothing so destabilizing as stability."  The banks lost sense of the risk that they were dealing in, creating complex securities that they are now incapable of valuing accurately. Everyone relied on the rating agencies to determine whether the securities were risky or not--even major law firms set their debt/equity determinations based on the credit rating granted.  Yet the rating agencies were just assigning ratings based on information fed to them by issuers, who paid the rating agencies bills.  A cozy arrangement that left investors out in the cold.  What if more of these securities had been labelled equity by the tax lawyers writing the options, because of the high risk in them?  Pension funds wouldn't have bought them, and banks sponsoring the securitizations might have taken their lending business more seriously. 

Given the increasingly important role of stock markets in the US economy, it is perhaps time to consider new and innovative regulatory mechanisms to control the ability of traders and investment banks to create too much risk and manipulate the markets.   I suspect mechanisms aimed at greater transparency of pricing would be the most valuable.  Perhaps a start would be public disclosure of derivative trades.  Investment banks have an enormous potential for impacting the market with their trades, as happened when the French bank Societe General sold positions connected with its rogue trader last week.  It is possible that the sell off played a critical role in triggering more panic among those fearful of recession and led to the sharp drop in the European markets.  Perhaps disclosure could be required whenever one of the investment banks decides to unload a large position or sell assets beyond some threshold amount.  And for goodness sake let's regulate these credit rating agencies.  It's time to change the market model where issuers pay agencies' fees to get a credit rating, and require the rating agencies to act like the public fiduciaries they should be.

Addition: 1/28 1pm:  Eduardo Porter has an op-ed on this issue in the Jan 28 NY Times, Should Bankers Pay for their Mismanagement?.  He supports improved regulation of banks, but notes that the "otherworldly" compensation paid big bank personnel is a major part of the problem as well.  Here's a key point about the folly of banks' recklessness.

There’s nothing like a smart banker motivated by an otherworldly bonus to get around the most carefully written regulatory limits on his or her ability to make money. Say regulators demand that banks maintain a big cushion of capital as a share of their loans, as a form of insurance in case the bets go bad. All a wily banker has to do is move the risky investment to a “structured investment vehicle” and claim it is not on the balance sheet. And there are other tricks.

Bankers’ recklessness would merely be a problem for shareholders to solve if banks lost only their shareholders’ money. But banks, as we painfully relearn every few years, spread the damage widely. That’s why the government not only explicitly guarantees bank deposits, but also offers implicit guarantees that banks will be bailed out in times of trouble.

Economic stimulus package: criticism grows

One day after the House and White House arrived at a tentative deal on an economic stimulus package that relies exclusively on tax cuts, criticism is mounting about the inefficacy of the deal.  There are a number of significant problems with the deal.  Paul Krugman worries about a "Stimulus Gone Bad" in his 1/25 New York Times op-ed.

First, a stimulus in the form of a tax cut distributed as a lump sum rebate will go to a large number who are financially sound, especially since the income cap is rather high.  The Tax Policy Center has put together a preliminary analysis of the distributional effects of these tax cuts.  See this link.  Krugman has put that information in a very easy to read table on the Krugman New York Times blog.  I've reproduced that picture below for my readers.

Krugman points out that 58% of the money is going to the top two quintiles, where it is not likely to be spent and therefore not likely to be an effective stimulus.  Only 20% is going to the bottom two who are likely to spend it right away. 

Second, even money that is spent may end up buying imports from our overseas competitors rather than helping the US economy (except for the retail distributors of those items).  Shipping more money out of the country seems unwise when we are already using massive government borrowing to finance an overseas war and the Bush tax cuts  (including the recent AMT patch that primarily helps people in the top quintile--those making $200,000 to $500,000).

Third, a more focused package would have given the rebate to those at the low end of the income distribution and then would have also included a number of spending measures that meet real needs at the same time that they provide immediate stimulus.  Food stamps and unemployment compensation have been used in the past because they serve both those functions so well.  The other spending priority that could make an immediate difference is infrastructure spending--bridges, schools, highways and similar much-needed projects that would also employ the construction workers who have seen their livelihood drop away with the subprime mortgage crisis and drop in home sales.  State and local governments can readily use large infusions of cash for many of their urgently unmet needs along these lines.  See Stanford Economist Paul David's comment in the New York Times, Critiques of Spending Plan Retrace Old Debate, in favor of funding for state construction projects and social projects for the poor.  That is money that would be spent locally to provide jobs for local workers. 

There are sounds of discontent from the Senate, and so there is a chance that they will add some of these more reasonable programs to the package.  While they are at it, they should eliminate the tax cuts for businesses--that is just another wasteful giveway.  Even Desmond Lachman at the American Enterprise Institute admits that tax breaks for corporations are wasteful.  See Id.

Economic stimulus package: tentative deal

According to the New York Times, here, House Democrats and Republicans have reached a tentative accord on a $150 billion stimulus package, in the face of a gloomy picture of the US economy, including the first decline in corporate tax revenues since 2003.  Under the tentative agreement, about two-thirds of the amount will go towards  a lump-sum rebate:  $300-$600 for individuals with AGI up to $75,000; $600-$1200 for couples with AGI up to $150,000, plus $300 per child) for households.  The remainder (a not insignificant amount of $50 billion) will go to a number of investment incentives like accelerated deduction for businesses--i.e., more of the kinds of tax expenditures favoring business that the Congress has been doing for the last six years.  (My concern--those businesses will simply undertake investments they would have done anyway--maybe accelerating them by a few months to get the "temporary" tax breaks.  And of course, temporary tax breaks for businesses have a way of staying in the Code as the interest group demand for extensions of the break gradually becomes a demand for making it permanent.  Just look at the R&D credit!)

Left out of the package is the best stimulus of all from the perspective both of ensuring an influx of spending in the economy and of protecting those at the bottom who have been most hurt by this prolonged period of not too strong economic growth that is centered at the top of the economic distribution coupled with actual declines in real wages and therefore standards of living for those in the lower distribution ranges.  That is, the House Democrats dropped their plan to include unemployment compensation and food stamps in the stimulus package in reaching.   Harry Reid, Senate Majority Leader, however, has indicated that the Senate may add in an extension of unemployment benefits, which is one of the first things Congress has done in most recessions.  The quid pro quo for not including food stamps and unemployment compensation in the package was the House Republicans' agreement to a "negative" rebate--ie, a rebate even when the recipient didn't owe an income tax liability, so long as the recipient had at least $3000 in earned income.

Stimulus or Making the Bush program permanent

House and Senate Republicans joined together today to offer legislation to make the Republican "dream" tax package reality, according to BNA's Jan 23, 2008 "RealTime" news service.  The package was presented in H.R. 5105 (introduced by David Dreier of California on the House Budget Committee and co-sponsored by various republicans such as Eric Cantor of Virginia) and its companion bill S. 2547 (introduced by Missouri's Senator Chris Bond).  The sponsors say that they want these considered as part of the stimulus package.

The proposal would (among other things):

• repeal the estate tax
• repeal the gift tax
• lower corporate income tax rates by 10%
• make the 2001-2003 Bush tax cuts permanent, and
• make the (expired) research and development credit permanent.

A section-by-section description is available on BNA at http://op.bna.com/dt.nsf/id/gker-7b5uv2/$File/Fair%20and%20Simple%20Tax%20Act%20Section-By-Section.doc.

None of these is a good idea and none of them have anything at all to do with providing the kind of immediate economic stimulus that might help the sluggish economy that is already suffering from the burden of long-term deficit and debt funding.  This package amounts to another give-away to wealthy taxpayers at the very top of the income distribution curve and no real aide for ordinary taxpayers in households that make  $100,000 or less a year. (Just one example for illustration--estate tax repeal by definition only benefits millionaires, since the exemption amount protects all but fewer than 5 in 100 estates from having any tax at all.)   The proposal appears to be an election-year ploy designed, again, to fool us sometimes silly Americans into thinking that tax cuts like these will make up for the creation of real businesses and real economic productivity.  We all like to get a tax break while thinking that the economy will still produce sufficient revenues to cover the many programs we want funded, but let's get real about what these tax breaks really do and to whom the benefits primarily accrue. 

Making the Bush tax cuts permanent is already off the table as far as consideration as part of the stimulus package is concerned.  The rest of them should be, too.

Economic stimulus package: CBO position

As we all are aware, the last few days have seen increasing turbulence in the stock markets both here and abroad and extraordinary action by the Federal Reserve to lower interest rates to address the credit crunch.  As the Democrats and Republicans campaign for office, candidates re releasing their proposals for a suitable economic stimulus.  Now the Peter Orszag, Director of the CBO, has provided testimony to the Senate Finance Committee about the kinds of actions that ought to be considered.  See his testimony, "Options for Responding to Short-Term Economic Weakness" at this link. 

Of course, let us also hope that he is correct in thinking that the current problems are truly "short term" and not indicative of a long and deep economic recession.  The testimony starts off with an unsurprising acknowledgment that the economy is slowing and can be expected to remain "sluggish" through 2008.  Although some have characterized the US economy as already in recession, Orszag notes that there continues to be disagreement among economists regarding whether the US will or will not actually undergo a recession.  Growth, in other words, may continue, but at best at a slow pace.  Various indicators are looking worse than they were just a few months ago, however, including unemployment statistics, and this uncertainty about the depth of economic problems makes it more difficult to know whether an economic stimulus is necessary.

The testimony notes that various "automatic stabilizers" help the US economy fight recessions, including food stamps and unemployment compensation.  Those expenditures by the federal government add to aggregate demand, creating a positive cycle for the economy that counteracts some of the negative forces. The report notes that actions by the Federal Reserve also help, by increasing liquidity.  The Federal Reserve has lowered target rates several times--the latest this morning in a surprise action to counter the perceived problem that stock markets around the world were dropping precipitously in response to continuing concerns about a possible recession in the U.S. economy.  Thus, the Federal Reserve dropped the target federal funds rate today (Jan. 22) from 4.25 percent to 3.5 percent, an extrarodinarily large drop at one step that was obviously intended to send a strong signal to markets that liquidity will not be a problem.

If policymakers conclude that these actions won't be sufficient to ward off recession and thus decide to enact some measure of additional fiscal stimulus, it will be important to target it appropriately.  Any stimulus should be designed well to take effect quickly (e.g., by affecting aggregate demand)--programs that can only affect demand over the long term simply don't make sense in this context.

"Given the elevated risk of a recession, ... targeted policies in mortgage markets or a well-designed and well-timed discretionary fiscal policy may have larger economic benefits than costs, whereas poorly designed or substantially delayed fiscal policy interventions may do more harm than good.  Id.

The kind of stimulus needed is a program that "stimulates aggregate demand" and "engage[s] more of the economy's existing short-term capacity."   The idea is to think short-term:  some tax law changes that are effective for the short term may actually slow long term growth, and some changes that are good for the long term may be ineffective in providing a short-term stimulus.  Households whose income increases from a stimulus tend to consume more and that consumption has a "multiplier effect" stimulating production and consumption.  The magnitude of the multiplier depends on how much of th increment to income is actually spent.  Timing is important--in the long term, what is needed is business expansion, but in the short term, what is needed is increase in demand.  Credit constrained households are likely to spend more of the stimulus, and lower-income households are likely to be the most credit-constrained.

Put that all together, and a stimulus that is targeted to lower-income households is more likely to be effective than one targeted at high-income households.  Studies of the 2001 rebate bear out that expectation.  Lower income households actually increased spending by more than the rebate amount, whereas middle-income households only increased spending about about 20% of the rebate amount.

Orszag notes that tax cuts for busineses may also stimulate, but are much more likely to do so if they are temporary rather than permanent, since businesses will have an incentive to increase their investments now rather than later--i.e, accelerate their plans for making future investments to the present.

There's of course a cost to stimulus programs, and that means an increased deficit.  That may be acceptable for the short term, as temporary programs take effect and push the economy, but can act as a negative drag on the economy if they persist for the long term.  "The more temporary a stimulative policy, the more likely that it will not significantly exacerbate the nation’s long-term fiscal imbalance."

  The testimony notes that a lump sum rebate will be the quickest way to get the stimulus into households. Linking the size of the rebate to the amount of the household's tax liability would not be very effective, since rebates would be more likely to be fully spent (rather than saved) by lower income households that have lower tax liabilities.   EVen better, the report notes, is to make the rebate refundable--i.e., even if the household's tax liability is less than the rebate amount, the household can receive the full rebate.  This makes sense:  provide a rebate that can be significant to lower-income households.

"A refundable rebate would place money in the hands of a substantial number of households that otherwise would not have been eligible to receive the rebate (or to receive the entire potential rebate). "

The testimony considers a number of other proposals, including across-the-board reductions in income tax rates (not a good idea, since the benefit goes predominantly to higher income households that are less likely to spend the full amount), payroll tax holidays (that would provide an immediate benefit to lower-income workers, but essentially waste a similar benefit provided to employers and might lead to wasteful timing games as employers tried to have more compensation covered by the benefit), and extending the 2001-2003 tax cuts (not a good idea, since "[w]hatever the long-term effects on work incentives and investment, permanently extending EGTRRA or JGTRRA after 2010 is unlikely to provide much demand stimulus to the economy in 2008").  It looks in similar detail at potential business stimulus and government spending.

This is a good presentation and provides useful historical information about the 2001 tax rebate program and other stimulus packages that Congress will need to consider as it plans some measures to counteract the growing danger of economic recession.  It seems quite clear that one of the best things to do is to get funds into the hands of lower-income taxpayers, through a lump-sum rebate.  I hope Congress makes that kind of proposal a keystone, and restricts the temptation of tinkering with other "investment incentives" which won't do as much because they'd merely get more money into the hands of those who already have it.  Congress needs to focus not only on the markets generally, and ways to improve the economy, but on the fact that ordinary Americans--those who don't make those huge annual incomes like the top few percent--are feeling extraordinarily uneasy about their economic prospects.  The stimulus package should help to stimulate the economy.  Ideally, it should also be aimed at another, more nuanced problem--it should help to reassure ordinary Americans that their lot is not going to simply get worse while those at the very top continue to enjoy whatever economic growth there is.

It is worth noting that Treasury Secretary Henry Paulson made remarks about the needed fiscal stimulus before the U.S. Chamber of Commerce today as well.  Those remarks, available at this link, concur in the need for a "robust, broad-based, temporary growth plan that can be swiftly passed and enacted."

The JCT released a menu of options derived from past discussions of stimulus.  That document is available at this link.