Stimulating

Sebastian Mallaby says we need some stimulus:

The fastest and fairest way to help ordinary people is via a budget stimulus package. Part of the extra spending should be distributed to state governments, which are having trouble maintaining Medicaid and other programs as recession eats into their tax revenue. Part of the extra spending could go to infrastructure projects, though this tends to be a slow way of getting cash into the economy. But much of the stimulus should be in checks made out directly to citizens. Wall Street is getting its bailout. Main Street deserves one also.

I would much rather do what Mallaby is suggesting here than continue to do nothing. But I think his proportions are a bit off. Of the things on his list, an aid package for state governments would be the fastest acting. Signing an aid package for state government into law would effect state spending levels immediately, since you could revise the budget plans even before the actual cash arrived. And absent the speed rationale, sending out flat checks isn’t an especially compelling way of doing stimulus, simply because a largish proportion of the money isn’t actually going to get spent in the right way. Having the government sell bonds to cut a check to a prosperous person who’s been selling stocks and buying bonds in order for him to buy more bonds is pointless. Better to target the money at needy people through things like boosting food stamps and/or to spend money on projects — infrastructure and others — that are useful on their own merits.