Fiscal Stimulus of $850 Billion Over Two Years

Me thinks Lori Montgomery needs a new calculator:

President-elect Barack Obama and congressional Democrats have entered discussions over an economic stimulus package that could grow to include $850 billion in new spending and tax cuts over the next two years ... Obama is putting together a package of $670 billion to $770 billion but that he expects additions by Congress to jack up the total to about $850 billion, or 6 percent of the nation's economy.

GDP is about $14.4 trillion per annum so $850 billion over two years is just under 3 percent – not 6 percent. Aside from this nitpicking on my part, there is some interesting information in this story:

A package of that size - which would include at least $100 billion for cash-strapped state governments and more than $350 billion for investments in infrastructure, alternative energy and other priorities - is a significant increase over the numbers previously contemplated by Democrats. It would exceed the $700 billion bailout of the U.S. financial system, as well as the annual budget for the Pentagon ... Furman and Schiliro said the package would include $100 billion to help states cover the expanding cost of Medicaid, the federal health program for the poor. With more than half of states reporting budget shortfalls this year, the package also could include big increases in state block grants and other programs intended to help local governments avoid layoffs or tax increases.

Uh oh – I have to nitpick again. First of all, it is true that defense spending is running at something near $700 billion per year so how is $850 billion over two years a larger figure? And if the extra cost of Medicaid eats up all of the $100 billion devoted to “cash-strapped state governments”, then what is left over to address what we discussed here? Maybe Ms. Montgomery needs more than a new calculator. Maybe she needs a better editor.