Is There a Correct Mix?

Does the stimulus bill include the right combination of spending cuts and tax increases? The answer is actually very simple:

1. There is no generally agreed-upon formula for combining tax cuts and spending increases in a stimulus bill.
2. Economic policymaking is at least as much an art as it is a science.
3. The right ratio of tax cuts to spending increases is whatever it takes to get the bill enacted.
4. It looks like this bill is going to be enacted.
5. Therefore, by definition, the mix in this bill is correct.

Capital Gains and Games

Stan wrote another interesting post last week, dealing with the gap between economic theory and political reality. However, Stan's entire argument depends on the assumption that a stimulus bill is necessary. I personally believe the right combination is tax cuts along with spending cuts, not increases. However, I am not in Congress, though even I understand cutting spending in the middle of a recession, regardless of the economic benefits, has too many political consequences. It is important to always remember every elected officials first job: to get reelected.