Saturday, December 11, 2010

Economics: Efficiencies of Types of Fiscal Stimulation

According to a recent Congressional Budget Office report on the impact of the Recovery Act, tax cuts had among the smallest ripple effects of all the act's major stimulus components. Purchases of goods and services by the federal government and transfer payments to state and local governments for infrastructure projects, on the other hand, appeared to produce a bigger bang for the buck.

A chart from the report showing these various output multiplier effects of each piece of the Recovery Act is below. A higher output multiplier generally translates to greater job growth.

For more, see Just How Stimulating Is the New Tax Cut-Jobless Benefit Deal? by Catherine Rampell, December 7, 2010 at Economix Blog, New York Times.

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