The figure of $60 billion of $61 billion is too high. According to recovery.gov, the $61 billion figure is as of last week–seven weeks after the end of the second quarter. Since the rate of stimulus expenditures is said to be accelerating, the number for the second quarter is undoubtedly significantly lower. This makes the $40 billion in tax relief all the more important to Romer’s argumente And if that figure consisted of actual rebate checks, or reductions in current withholding, then of course it should be included in the total outlays of the stimulus program. But in fact very little of it consists of rebates, which is why it is not recorded on the government’s website as stimulus money spent and is why Romer should not have said that by the end of the second quarter the government had “spent” “more than $100 billion” in stimulus money. Almost all the tax relief provided for in the stimulus bill consists of reductions in taxes by individuals and businesses. The question is how many of those reductions have resulted in increased cash flow to taxpayers. If, for example, the reduction is reflected in reduced withholding, or a reduced payment of estimated tax by people who filed estimated returns on April 15, it should be counted as stimulus spending; it puts money in people’s pockets. If it merely reduces their future tax liability, it does not. All that is certain is that not all that $40 billion in tax relief is stimulus money; not all, and, at a guess, not most, put money in people’s pockets before the second quarter ended. [emphasis added]
There’s a moving window on the Recovery.com, so I can’t see the cumulative $60 billion figure for end-June, but I do recall it. Better yet, Donald Marron recalls it. No one else has disputed the $60 billion figure.
In any case, apparently in this latest attempt to salvage his argument, Mr. Posner has given up on accusing Dr. Romer of deliberately lying about the $40 billion figure, and has moved on to redefining those funds. (By the way, I’m not sure I’ve seen him explicitly admit that dividing a quarterly figure by annualized GDP, as he does in his original post, is a mistake.)
Specifically, he is saying that the $40 billion is partly decreased withholding, or shifting around of tax liabilities, and not entirely rebates. Mr. Posner does not provide any source for this assertion, and the language in Dr. Romer’s speech (and footnote 4) seems to indicate otherwise.
Let’s assume absolutely none of the $40 billion took the form of rebates. As I showed in my math in this post, assuming zero spending out of the tax component, one can easily obtain 4 ppts growth in 2009Q2 GDP, given that the “transfers” to the states are largely helping support continued spending on goods and services like teachers, civil servants, health services, etc.
I am of course working in the “old-fashioned” Keynesian mode that Mr. Posner says he prefers. If one hews to a real business cycle approach, or other approaches were the economy does not systematically deviate from full-employment, then none of the foregoing is relevant.
Update 8/28 12:20pm Pacific: See also Justin Wolfer’s take on Posner.