News that 40% of the stimulus package will be tax cuts is very disappointing. Tax cuts have a spotty record as a stimulus. The 2001 cuts didn't work; they paid down bills. 2003 did work. It went to parents in August and baby did get a new pair of shoes just in time for school. The 2007 cut was largely a bust.
In tough economic times tax cuts don't work because when you're scared of losing your job you save the tax cut. Smart individual thinking, very little help for the economy.
This is one where it is bad economics AND bad politics. By including large tax cuts Obama's idea is to get 80 votes in the senate. Even before details are released Politico is running the headline, "GOP unusually resistant to Obama tax cut".
Paul Krugman expresses it best.
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