WHAT'S WHAT ON THE STIMULUS PACKAGE?: I must say I have mixed feelings. Ryan Lizza makes a great case for why the administration is pushing so hard for a tax cut on dividends -- boosting the stock market leads to a wealth effect that pumps up consumption. Lizza cites the work of one Dean Maki, who was a terribly smart classmate of mine in the Stanford economics program. Go Dean!

I'm also a bit puzzled at the Democratic emphasis on the distributional implications of the tax cut. OK, I'm not, but here's the thing -- hasn't this economic slowdown had a disproportionate impact on the middle class? [You don't know?--ed. Look, this is Mickey Kaus' bag. Mickey, has the slowdown disproportionately affected the bottom 20%? Will this impact welfare reform?] This Census table suggests that I could be wrong, but it ends in 2001.

That said, I'm troubled by the the effect of a burgeoning deficit on increasing long-term interest rates. Despite Megan McArdle and Mickey Kaus' best efforts, I tend to side with Brad DeLong on this one. There's a political argument against the tax cut as well, and it comes from today's Washington Post:

"President Bush's 10-year, $674 billion economic growth package -- coupled with a war with Iraq -- would push the federal budget deficit well into record territory next year, and possibly as high as $350 billion, private-sector budget forecasters said yesterday.... in sheer dollar terms, it would easily eclipse the $290 billion record set in 1992, the last year of George H.W. Bush's administration. It also would be a steep fall from the record $236 billion surplus of 2000."

Does W. really want any parallels drawn between the current economy and the 1992 economy?

Plus, I can't escape the parallels between the current economic situation and 1993. In both situations, the economy was sluggish, but the long-term fundamentals (i.e., labor productivity) looked good, except for long-term interest rates. If you recall, Clinton wanted a short-term spending boost, but it was wisely shot down by deficit hawks. I can't escape the feeling that -- economically -- this remains be the best course of action for the present. However, both politicians and pundits have a bias that favors action over inaction.

UPDATE: The New Republic's &c sagely defends the logic of ceteris paribus against the Wall Street Journal's editorial page. It's truly a sad day when the TNR has to explain the building blocks of economic theory to the Journal.