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Ed Glaeser for Another Stimulus

He writes:

To Spend or Not to Spend: Austerity may be the right program for smaller countries facing lenders that may lose confidence in their debt...

I would put it much more strongly than that: austerity is definitely the right program for smaller countries with open economies facing lenders that may lose confidence in their debt...

On the other hand, I would put this more strongly too:

Stimulus may be the right policy for larger countries that are trusted to repay and that play a large role in maintaining the global economy...

Say, rather, stimulus almost surely is the right policy.

Ed goes on to argue that the next stimulus should be tax-based rather than spending-based. It's an argument. I'm not sure how strong an argument it is, however:

Cutting payroll taxes for lower-income workers who have just been unemployed is an example of stimulus through borrowing, rather than spending. The government is... just borrowing the money and giving it to newly employed workers... this kind of inter-temporal shuffling of taxes has limited downside risk.... The case for federal aid to states is particularly complicated, and I’ll return to that next week.

The case for more government spending on tangible government products is most problematic... public spending on roads or  high-speed rail can be enormously wasteful. At the extreme, spending a billion dollars on a bridge to nowhere may temporarily increase employment and gross domestic product, but it does so by burning a billion dollars on something no one wants. Infrastructure is serious business....

There is little downside to giving a tax break to previously unemployed low-income workers. Those dollars are being given to people who value them. Building a bunch of unneeded highways, conversely, is a road to waste. The political and economic case for a second stimulus is strongest if that stimulus means a temporary tax reduction and weakest if the package is yet another increase in the size of the public sector.

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