May 12, 2003

"Stimulus" Packages

Morgan Stanley's Richard Berner on the potential effectiveness of what is now being called a "stimulus" package:

Morgan Stanley: ...For example, the Senate Democrats' plan has the smallest 10-year cost, but its authors claim $125 billion in first-year stimulus.  That's because most of its stimulative features are temporary and most of the revenue offsets only kick in later.  In contrast, the Senate GOP plan (as it stood at week's end) nets to a 10-year cost more than twice the size of the Democratic proposal.  Based on Congressional Joint Tax Committee data, however, we estimate that its first-year stimulus is only about $70 billion, because some of its stimulus comes on more gradually and is permanent...

Posted by DeLong at May 12, 2003 11:32 AM | TrackBack


Even Morgan Stanley knows how to compare the short-run stimulus effects relative to the long-run fiscal costs. If Morgan Stanley knows this - isn't it a reasonable assumption that their corporate clients are reading these releases? Now if only our policymakers would read what those who actually make investment decisions are reading.

Posted by: Hal McClure on May 12, 2003 03:27 PM
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