Stimulus Reality: Spending creates VASTLY more jobs than tax cuts

by frog

That is the title of a very thought provoking post over at OpenLeft. The author, Paul Rosenburg, takes data from Moody’s and combines it with research from the Center for Economic Policy and Research to create the following chart:

economic stimulus; tax cuts versus spending

It lends credence to Treasury’s call for tax cut’s to be delayed or reduced if government was not planning on cutting spending. But that’s not the real point of my post.

More importantly, it opens the door for a discussion on just what a NZ fiscal stimulus package should look like, and what sort of actions are likely to produce the most jobs. From the chart above, it seems to me that allowing SME’s to defer or even suspend provisional tax payments would be the only “tax cuts” worth considering. There is no doubt that we are about to embark on a huge debate of what constitutes “infrastructure” spending.

What do you think it should be?

MotherJones sums up their reaction to the chart quite well, but I’m interested in your opinions.

The takeaway? Food stamps, unemployment benefits, and infrastructure investment put the most money back into the economy for every dollar spent on them. Tax cuts for corporations and the wealthy do the least. (A payroll tax holiday, which is essentially a tax break for poor people, isn’t so bad.) Job creation maps similarly.

So when conservatives tell you that FDR’s public investment programs made the depression worse and that we need to hold fast to the conservative economic principles that created the current mess, shoot them this link.

Perhaps Mr Key should have a look at this chart too, before the infrastructure announcement due this week and the upcoming jobs summit.

Hat tip: Valis


frog says

Published in Economy, Work, & Welfare by frog on Mon, February 9th, 2009   

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