The reality is that no one truly knows due to the nature of our current recession. The old mantra of tax cuts as sure fire stimulus flew out the window last year. Our recent prescriptions for sustained economic growth had been to increase consumer spending. Recent statistics indicate that consumer spending represents roughly 70% of our GDP. The problem is that putting more money in consumer hands right now would have a very temporary and possibly ineffective result. Due to the sluggish housing market and record personal debt ratios, simply putting more $$$ in consumer hands may see that money vanish in paying off Capital One cards or mortgages. None of those choices stimulates demand that has a measurable effect on GDP. Its not that some people won't spend the tax cut, of course some will. Some numbers showed that lower income folks spent more the rebate than higher income. But did it help? Perhaps it kept the recession from getting significantly worse, but that's hard to measure.
Government spending offers some higher hope, because its guaranteed spending vs. potential savings or non-durable goods spending. This report
, from Mark Zandi at Moody's offers some insight on government spending as a remedy to the current recession. Of course, bear in mind this is a predictive document, but the conclusion is promising. Its important to note that Zandi is optimistic that both instruments will have a beneficial effect on the economy, not for just spending. All in all, I think the Government currently sucks
. Debate your stand views on this.