Good stimulus, bad stimulus
To draw out one of the points in Dylan's excellent post on various stimulus policies, not all stimulus is created equal. But the distinction that people are comfortable drawing is not the distinction that's actually relevant for stimulus.
Normally, people think about government on a waste/not-waste spectrum. A dollar of Medicaid funding, or bridge building, is not-waste. A dollar of volcano monitoring in Alaska is waste, at least unless you're an Alaskan and don't want to die in a volcanic eruption.
But for stimulus, a dollar that's spent, say, building a museum about Woodstock is as good as a dollar spent building a bridge to get people to a museum about Woodstock. From a stimulus perspective, waste happens when a dollar is saved rather than spent, as that dollar doesn't immediately stimulate the economy. That's why tax cuts are often ineffective: If you give a middle-class worker a tax break at a time when he's not unable to pay the bills but is trying to replenish his gutted 401(k), he'll save it. And that, from the stimulus's perspective, is waste.
One of the failures of the stimulus was that it included an enormous amount of tax breaks. Roughly a third of the total, in fact. And some of those breaks, like the $70 billion AMT patch, were not effective stimulus under any definition of the term. But they were there to get votes, and to show Obama was being bipartisan in his construction (though in Jon Alter's book "The Promise," Obama says that giving these breaks up-front rather than negotiating with the Republicans for them was a massive mistake). The problem is that they made the stimulus less effective than it could've been, and that made it easier for Republicans to attack down the road.
All of this is background to the fact that the Senate and the House are currently trying, and failing, to pass Medicaid aid to the states. So far as stimulus goes, nothing makes more sense than Medicaid funding for the states (Tyler Cowen even suggests federalizing the program, and I couldn't agree with him more). That Medicaid money would be spent, and quick, as it's replacing money that is already needed. It would also be buying something of value, at least if you believe that health care for poorer people makes sense. So on both the saved/spent spectrum and the waste/not-waste spectrum, it's good policy. Much better, in fact, than policy Congress has already passed.
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