McCain and stimulus: a counterfactual
From Brad DeLong:
Had John McCain won the presidential election of 2008, at the start of 2009 he would have in all likelihood proposed a trillion dollar fiscal stimulus bill–3/4 tax cuts and 1/4 aid to states–and he might have picked Tim Geithner for his Treasury Secretary. Democrats would have called for fewer tax cuts, more state aid, and some government infrastructure spending initiatives in the fiscal policy mix, but the need for the government to cushion the recession would have brought them into line. When Obama took office he bid $800 billion for his fiscal stimulus bill–about 1/3 spending, about 1/3 aid to states, about 1/3 tax cuts–thinking that would be a plan that would win broad bipartisan assent. And he was wrong.
Me: I agree that he would have “spent money” by cutting taxes more. But there is every reason to believe that large payroll tax cuts may have better met the “targeted, timely and temporary” formula. And been more effective. Thus they could have been smaller. And then Congress could have passed a separate infrastructure bill for repair ofvboth our transportation system and upgrading the grid.