Harvard Economist: Obama’s Tax Cut Not Likely to Help Economy

Mike Lillis — Fri, 09 Jan 2009 18:21:02 +0000

Too late to slip into this morning’s story on the tax cuts being floated as part of President-elect Barack Obama’s stimulus plan, Harvard economist Martin Feldstein emails to add his name to the growing list of skeptics. Workers given a $500 payroll-tax credit, Feldstein writes, will likely use it the same way they did their $600 rebate checks last year — put most toward savings or paying down debt. From his email:

There is a significant danger that the Obama 2-year tax cut would fail to raise spending, just as the rebate did. If it is made permanent, that is a major long-run increase in the national debt.

Feldstein, formerly the chief economic advisor to Ronald Reagan, said that “some direct government spending would be more cost effective.” And he’s puzzled why increased defense spending hasn’t gained more mention in the stimulus debate. (Not a new topic for him.)

I am disturbed that the Obama transition has not asked the military service chiefs for their suggestions for quick-spend programs that can strengthen the military.

Don’t worry. There’s plenty of time for the Pentagon — like everyone else — to come begging for a piece of this pie.

The Washington Independent » tax cuts as stimulus

Harvard Economist: Obama’s Tax Cut Not Likely to Help Economy