Components of Stimulus Vary in Speed and Efficiency

At first, it will trickle into paychecks in small, barely perceptible amounts: perhaps $12 or $13 a week for many American workers, in the form of lower tax withholding.

For the growing ranks of the unemployed, it will be more noticeable: benefit checks due to stop will keep coming, along with an extra $25 a week.

CNBC.com

At the grocery store, a family of four on food stamps could find up to $79 more a month on their government-issued debit card.

And far bigger sums will appear, courtesy of Washington, on budget ledgers in state capitals nationwide: billions of dollars for health care, schools and public works.

There is no doubt that the impact of the $819 billion economic stimulus package advanced by President Obama and approved by the House on Wednesday will start to be felt within weeks once the final version becomes law.

But estimating how effective the huge program of tax cuts and spending will be in getting America’s economic engines humming again is a far more complex calculation requiring almost line-by-line scrutiny of the 647-page bill, lawmakers, economists and policy analysts say.

While it may be difficult to predict how well the overall plan will work, it is easier to draw conclusions about its individual components, gauging them against the basic goal of any stimulus: to promote economic activity and create jobs as quickly and efficiently as possible.

Devising any economic stimulus plan is tricky: initiatives that can be carried out relatively fast, like tax cuts, tend to provide less bang for the buck in terms of generating jobs and economic growth, while initiatives likely to spur more robust activity, like public works projects, can take so long to get under way that they arrive too late.

Tax Cuts

The provisions intended to have the swiftest impact are the tax cuts, totaling $275 billion, roughly a third of the package.

Republicans say the cuts are too small, some Democrats say they were ill designed in a vain effort to appease House Republicans, and some economists say both sides are right: that the plan should include more effective tax cuts and more of them, and also address specific problems like the weak housing market.

Mr. Obama’s signature tax cut would provide a credit of up to $500 for individuals and $1,000 for couples. It won praise in an analysis by the Tax Policy Center, a nonpartisan research group, because it could be carried out quickly, by reducing the amount of money withheld from paychecks.

But the same group also criticized it because it would help families earning as much as $150,000 a year, who are more likely to save than spend. (Saving, or paying off debt, might make sense for individual households, but what the economy needs most is for people to spend money, helping stores to sell more, factories to produce more and employers to avoid cutting additional jobs.)

Some experts say adjusting withholding rates could prove complicated, delaying the money. But the White House says the plan would work even better than a lump-sum rebate; some research suggests that rebate checks are more likely to be saved than tax reductions spread out over a length of time.

Even some economists who generally support the stimulus think that the main tax proposal would provide limited economic lift.

“People are going to spend 30, 40 cents on the dollar, so the multiplier is going to be low,” said Adam S. Posen, deputy director of the Peterson Institute of International Economics.

Aid to States

One area where analysts say the bill would be relatively effective is in providing assistance to states, many of which, to comply with balanced-budget requirements, are facing the prospect of steep cuts in jobs and services. Aid to states does not expand economic activity, but it helps prevent cuts that would make the downturn even worse.

CONTINUED : Infrastructure, health care, energy

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