Friday, January 16, 2009

Disagregated Stimulus

The NYT today has a great breakdown of the stimulus plan proposed in the House.

The big take away of course being that at $825 billion this is a huge amount of money.

Now I'll give the Social Security-specific tax. I'll skip the monetarists take because to put it simply that interpretation is "don't do stimulus; it doesn't work. Fed policy will get you out of this." That interpretation of course matters and has strong evidence. Sadly, the Hill is likely to ignore it.

There are several things here that matter for Social Security. The biggest being the $275 billion in tax cuts. The plan gives $500 to individuals and $1000 to couple in reduced payroll withholding. This is essentially Obama's Making Work Pay plan. The difference is that instead of refundable tax credits they are going after payroll. This make little to no accounting difference for Americans who already pay no income taxes (about 45 percent of Americans).

The other provision is a small one to spent $4billion (small in this context) to increase benefits to low-income and disabled retirees. This is essentially just an injection into current programs.

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