Stimulus Logic

Keith Hennessey has an excellent analysis of the stimulus package. He concludes with

It is sad that instead we have to wait until the middle of next year because the White House deferred to Congressional desires to spend on infrastructure.  This strategic mistake was avoidable, and the recovery will be delayed because of it.

His analysis makes sense if you believe that the goal of the stimulus package was to stimulate the economy. But the form and timing of the stimulus package makes great political sense when you consider two factors:

  1. Channeling stimulus spending through state governments benefits state employees. State employee unions are (mostly) helpful in electing Democrats.Payback is important in politics.
  2. Deferring the impact of stimulus spending will make any benefits much more obvious close to the mid-term elections. A quick stimulus, on the other hand, might be forgotten by voters.

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