Olivier Blanchard, the IMF's chief economist, said "the size corresponds roughly to what we think is needed." He backed the Obama approach of targeted tax cuts, saying the money should go to consumers who are "truly credit constrained." In an accompanying research paper, Mr. Blanchard and three other IMF economists advised against broad cuts in corporate tax rates, dividends and capital gains -- Republican favorites -- which they judge "likely to be ineffective" because profits are low. The changes "are often difficult to reverse," they added. In an interview, Mr. Blanchard said a general tax cut may be less effective than other measures because many consumers would save the money.
If we choose to go the fiscal stimulus route – shouldn’t we be interested in getting some real bang for the buck? I’m glad to see that Olivier Blanchard thinks so!