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Next Stimulus Plan Will Hinge on Spending

Sum may push $1T; economists say tax breaks not as effective
By Jim O'Neill,  Newser User
Posted Dec 1, 2008 10:09 AM CST

(Newser) – With President-elect Obama promising 2.5 million new jobs, analysts see a stimulus package that will rival, if not eclipse, the nearly $1.4 trillion spent to calm Wall Street, Louis Uchitelle writes in the New York Times. And with the economy contracting, federal spending should have a greater effect than tax breaks alone, many say.

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Economists say spending $1 on infrastructure generates $1.50 in economic activity, where tax breaks can return as little as 30¢ per dollar. The worry for politicians, one analyst says, is “if you don’t pick a big enough number for a stimulus package now and you have to announce another number next year, people will say: ‘Oh, the stimulus didn’t work. What makes you think this one will?’” (Read more financial crisis stories.)

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