Sunday, June 20, 2010

You've seen the stimulus. Now, meet the anti-stimulus.

Finally, state and local aid happens to be an uncommonly effective form of stimulus. The difficulty with most stimulus spending is that not all of it gets spent. Tax breaks, for instance, often get saved. Mark Zandi, the chief economist for Moody's Economy.com, estimates that cutting the corporate tax rate gets you only 32 cents in stimulus for every dollar you spend on it. That's not the case with state and local aid. When you're plugging state budget gaps, you know that money will be spent, because it was being spent before, and usually on something that the state's residents actually wanted.

Zandi estimates that every dollar spent on it actually gets you $1.41 in stimulus. It's the best anti-anti-stimulus you could ask for.

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