But rather than blow money on a lavish reenactment of the New Deal, or continue bailing out undeserving corporations, why not really think outside the box? Rep. Louie Gohmert (R., Texas) suggests an across-the-board reprieve on paying 2008 income taxes. This would leave an extra $1.2 trillion in the hands of Americans, who are the best stewards of their own money.
I guess Mr. Goldberg never heard of the Ando-Modigliani life-cycle model of consumption or Milton Friedman’s permanent income hypothesis. These models would predict that much of this tax rebate would be saved and not consumed. Hey, wasn’t that the explanation for why Bush’s version of this did so poorly as far as stimulating aggregate demand?
Update: I emailed Mr. Goldberg a link to this post and he was not particulary amused. His retort?
Heaven forbid Americans save their money, which usually amounts to putting it in the market, 401ks
That confirms it - he has no idea that the issue at hand is insufficiency of aggregate demand yet he deems himself qualified to write a post on this topic. Go figure!