A real stimulus

Awhile back, when I was ripping on President Obama’s stimulus package and calling it a failure, some of you asked me what my alternative would have been. The answer is simple. A tax cut, particularly one on payroll taxes, would have jump-started things while costing the government much less.

An op-ed in the Wall Street Journal by Michael J. Boskin, a Stanford economics professor and former chair of the Council of Economic Advisers under the first President Bush, makes this case quite well. (Read it here.)

Boskin cites research that shows a 6 percent cut in the payroll tax would have generated far more than the 1 million jobs the Obama folks claim to be creating or saving through the stimulus. A tax cut early this year would have given us an unemployment rate just less than 9 percent today, according to his projections.

Of course, such projections leave plenty of room for argument, but it simply makes sense that the best way to help businesses of all sizes is to make it easier for them to contract to meet the demands of a recession without having to drop people or perhaps close up entirely.