Jeffrey A. Miron
Special to CNN
When the Obama administration takes office in January, it will propose a fiscal stimulus consisting of increased government spending and lower taxes.
By all accounts, the package will be big - at least $700 billion, and possibly $1 trillion, over two years.
The goal will be to end or moderate the recession. According to the textbooks, government spending raises the demand for goods and services. Tax cuts also spur demand by putting more income in the hands of consumers or more after-tax profits in the hands of businesses.
Is a fiscal stimulus good policy? The answer is no if the stimulus consists of increased spending. The stimulus may be good policy, though, if it consists of lower taxes.
Consider first the increased spending.
Anderson Cooper goes beyond the headlines to tell stories from many points of view, so you can make up your own mind about the news. Tune in weeknights at 8 and 10 ET on CNN.
Questions or comments? Send an email
Want to know more? Go behind the scenes with