TW: I follow Pethokoukis as a way to keep track of reasonable right-wing economists. I did not care for these suggestions to averting a depression. They represent more or less unaltered right-wing dogma of the sort deployed extensively since 2001 by W. Bush. Somehow deploying more W. Bush economic policies does not seem a valid policy response.
From Pethokoukis at US News World Report advocates:
"...Tax cuts can work much faster. Withholding schedules can be changed. Payroll tax deductions stopped. In addition, there should be a tax holiday for corporate taxes along with a big rate cut. All this would boost confidence and let individuals and business keep more of what they earn. Fear is killing this economy."
TW: I agree tax cuts can be implemented faster than some but not all spending initiatives (i.e. aid to states to prevent layoffs and service cuts could be implemented relative rapidly as well, if the states know the aid is coming they can avoid the cuts in the first place). But what about the lag once a tax cut is implemented. Conservatives seem to have the belief that tax cuts are magic wands that move the invisible hands of the beloved free market. In reality firms would integrate a future tax cut into their planning but amidst plummeting demand why would they hire more workers and build more plants? Hence why would a corporate tax cut actually help anything anytime soon.
Implementing payroll tax reductions for lower and middle class earners might have some value but as I have mentioned earlier we are in a scenario where the rational decision for an individual is to hoard one's nuts. Reducing payroll taxes would likely merely induce more hoarding (which is largely what happened with last summer's stimulus checks).
The fundamental purpose of government induced spending in a demand driven contraction to ensure someone actually spends, not saves. Yes there will be a lag which is why it will be so painful to watch W. Bush sit on his hands for the next six weeks. Obama must hit the ground running come January 20th.
http://www.usnews.com/blogs/capital-commerce/2008/12/5/november-jobs-report-533000-reasons-for-obama-to-change-direction.html
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