First Paul Krugman.
http://www.nytimes.com/2009/01/09/opinion/09krugman.html?_r=1&ref=opinion

Now, fiscal stimulus can sometimes have a “multiplier” effect: In addition to the direct effects of, say, investment in infrastructure on demand, there can be a further indirect effect as higher incomes lead to higher consumer spending. Standard estimates suggest that a dollar of public spending raises G.D.P. by around $1.50.

But only about 60 percent of the Obama plan consists of public spending. The rest consists of tax cuts — and many economists are skeptical about how much these tax cuts, especially the tax breaks for business, will actually do to boost spending. (A number of Senate Democrats apparently share these doubts.) Howard Gleckman of the nonpartisan Tax Policy Center summed it up in the title of a recent blog posting: “lots of buck, not much bang.”

Then David Brooks.
http://www.nytimes.com/2009/01/09/opinion/09brooks.html?ref=opinion

Christina Romer is Barack Obama’s choice to lead his Council of Economic Advisers. In 1994, Romer and her husband, David, wrote an essay entitled “What Ends Recessions?” In the first paragraph, the Romers noted that “economists seem strangely unsure about what to tell policy makers to do to end recessions.”

The Romers surveyed the recessions of the previous 50 years to try to reach some conclusions about what works. “Our central conclusion is that monetary policy alone is a sufficiently powerful and flexible tool to end recessions,” they wrote. Automatic spending policies like unemployment insurance have sometimes helped. Discretionary policies, like tax cuts and stimulus plans, have not been of much use. As they put it: “Discretionary fiscal policy, in contrast, does not appear to have had an important role in generating recoveries.”

And that gets to my larger point: it’s the spending. Spending is the cause of those deficits. Tax revenues have increased after taxes have been cut, just not enough to keep up with spending.

Sadly, Republicans have been much less effective at controlling spending than in cutting taxes. That’s why the deficits are so out of control (although it is the unfunded liabilites of elderly entitlements that are really going to bankrupt this country).

Regarding Canada’s “lower taxed provinces”, that would be Alberta, right? Do you really think it fair to compare the highest American tax rates with a province that gets all its revenue from oil companies? The province is making money hand over fist because of the oil sands (or, they were when oil was $145 a barrel).

It would be more fair to compare Alberta to Alaska. And Alaskans don’t pay any taxes. No income tax, no sales tax. And, in fact, they get a check every year from the state, paid for with oil revenues.

Across the board cuts in marginal tax rates are very effective, they find.

So… no, earmarks are not a good way to go. Neither is “infrastructure” spending, or tax rebates.

Sadly, this is all that Obama is proposing.

I think the rhetoric and reporting in support of the stimulus is as overheated and simply WRONG as that in support of the TARP. Seeing as how ineffective that was, you would think that people would think twice.

I think that most people are like you. They support government intervention in the economy in principle, and think that we just need better interventionists.

I think that would will find that the interventionist is quite irrelevant. Obama will be as effective as Bush.

I agree with Baker and Richard, we can identify some spending that’s counterproductive. The motto should be First, Do No Harm. After that its sort of a crapshoot.

I’m a big Obama fan, but the middle-class tax cut is silly if the idea is to get money into the economy, many people will save it or pay off credit cards. I’d also put in a good word for earmarks, many of which reflect immediate local needs.

Of course neither of these is as stupid as say, forcing $50 billion on solvent banks with no strings attached, or deciding to rescue one investment house and let another fold with no rationale. We’ve really got no way to go but up in terms of government policy.

That would invalidate both Madrick’s views… and mine.

But it would probably vallidate Richard’s views. The creative class drives growth and productivity, yada, yada, yada. Taxes and welfare are quite irrelevant.

5/6ths of the way through “Rise”, and I still have trouble accepting that premise.

“Lindert’s exhaustive statistical analyses were based on eighteen countries over ninety years. No matter how he juggled the data, he found no relationship between the growth of GDP per capita and productivity and the level of taxes or the extent of social spending. There is a dramatic ‘conflict between intuition and evidence,’ he writes. ‘It is well-known that higher taxes and social transfers reduce productivity. Well-known—but unsupported by statistics and history.’ And he goes on: ‘Neither simple raw correlations nor a careful weighing of the apparent sources of growth shows any clearly negative net effect of all that redistribution.’

Richard, I’m surprised to see you linking to this nonsense.

You’re a math guy. Do a simple regression on top marginal tax rates and economic growth over the last, say, 10 years. Include the nations of the European Union, the Anglosphere, and Japan.

From what I’ve seen, the only nation with higher taxes to do better than the US has been Norway. Seeing as how Norway is a major oil exporter, that is not surprising.

Europe and Japan are not growing. The wealth that they have was largely built during a time when their taxes and welfare state spending were much lower than they are today.

The seeds of recovery are already planted. Energy prices have plunged. Obama is going to keep the Bush tax cuts, and maybe cut a little more. Bernake has been true to form and dumped bags of cash from hellicopters. We’ve already been as “pragmatic” with the TARP as most of us care to be. More “stimulus” in the form of porkbarrel spending is not needed.