Stimulus bill is only 64% stimulation

The art of compromise is making all sides equally unhappy with the result. The good news is that something resembling an economic stimulus package is ready to go President Obama's desk. The bad news is that it contains significant amounts of tax cut pork. Tax cuts don't stimulate, since people generally save them. But the good news is that the other 64% of the bill is likely to lead to spending, much of which is the most prized kind of all -- investments that last once the government spigots are turned off.

The final bill includes $507 billion (64% of the total) in spending programs and $282 billion in tax relief (the remaining 36%). Here's some of the good news: a dollar in state government aid to kill cuts in services or layoffs yields $1.36 in total economic payoff, and a dollar in infrastructure investment yields $1.59. By contrast, as I posted, when people get tax cuts, the savings rate spikes. That's particularly true when the tax cuts come during periods of economic distress. So those cuts are vote-buyers that unfortunately represent $282 billion in missed opportunities to stimulate.