Like Alex Knapp and Jim Henley I’m wondering about this whole stimulus thing; the more I think about it, the more I think that “recapitaliz[ing] the middle and lower classes” might actually be the more sensible stimulus. Pour $800 billion into a payroll tax holiday (probably the fastest way to inject money into the economy—it could be implemented and have money in peoples’ pockets by April 1st if passed today) of some form* and there are basically four outcomes I can see:

1. People spend the money. This stimulates the economy.
2. People save the money. This provides more money for banks to loan to stimulate the economy.
3. People pay off debt. The banks become better capitalized and less likely to go belly-up at taxpayer expense. This also provides more money for banks to loan to stimulate the economy.
4. People remit the money to relatives overseas. This improves our balance-of-payments and increases demand for stuff we export to those countries.

Then again, politicians can’t easily take credit for any of those outcomes, hence why it’s more fun to spend the money on things that we’d spend money on anyway at a later date.

* I’d exclude all income below the social security earnings limit from the “employee” contribution to FICA, Medicare, and self-employment taxes; at current rates we could have a 2-year employee contribution holiday for around $900 billion in extra IOUs for the various trust funds.