Saturday, February 14, 2009

Economics Makes Sense

The team over at EPI have come up with this analysis of how effective different measures are at stimulating the economy. Not surprisingly, consumption subsidies (food stamps, extending unemployment benefits) have more effect than making the rich richer (dividend tax cuts, corporate tax cuts, etc.) This is because the less money you have, the larger percentage of your income turns into consumption. Those who qualify for food stamps spend just about everything. So by giving them a subsidy, it gets turned into economy, whereas people who get more money from a dividend tax cut will probably not spend as much of it. Thanks, marginal propensity to consume!

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