We Need Big Government Today, Smaller Government Tomorrow

  It turns out that when it comes to the stimulus debate, both Democrats and the GOP are right, but for the wrong reasons. The Congressional Budget Office (CBO) released its full economic analysis of the American Recovery and Reinvestment Act late on Monday. It used “a range of estimates … that encompass a majority of economists’ views” to produce multipliers, estimating the effect that a single dollar spent by government (or foregone through tax cuts) has on the broader economy. And making government bigger works best! In fact, economically, it can’t go wrong—purchases of goods and services by the federal government, and transfers to state and local governments for infrastructure, each generate 1 to 2.5 times the value spent in terms of return to GDP. Menawhile, those tax cuts that were the centerpiece of President’s Obama’s middle class appeal, including the “Making Work Pay” credit? Less valuable – from a net loss (0.5 multiplier as a low end estimate) to a modest benefit (1.7 ... (link)