The View From 1776

Read Why Spending Stimulus Plans Fail in the Wall Street Journal.

See also Stimulus Packages: 1929 to 2008 and Why Tax Rebates Are Delusional.

More effective than pumping inflationary dollars into consumers’ hands would be one of JFK’s primary stimulus measures in the 1960s.  As Ernest S. Christian and Gary A. Robbins wrote in The JFK Stimulus Plan (Wall Street Journal, January 12, 2008; Page A8):

Got an economic downturn? Need a stimulus package? Why not adopt full or partial first-year expensing (or its cousin, the investment tax credit), which has come to the rescue many times since 1962, when President John F. Kennedy first administered this type of remedy to the economy?
By allowing more of the cost of machinery and equipment to be deducted more quickly, first-year expensing causes new investment to be made sooner. More investment means more productivity—and 80% of the net benefit from increased productivity goes to labor. Expensing is a no-risk tax cut. It worked four times in the 1960s and 1970s. It worked in 1981-1982 and again in 2002-2004…

During the recession that started in 2000, the economy did not respond much to a Keynesian tax cut in 2001, consisting mostly of a new 10% bottom bracket for individuals and a child credit. In the first quarter of 2001, real investment began falling at an annual rate of 6%. The decline was stopped by the 30% partial expensing enacted in the spring of 2002. Investment started rising again at a real annual rate of 9% beginning with the enactment in 2003 of 50% partial expensing, in combination with lower rates of tax on capital gains and dividends.