The Brookings Institution's Hamilton Project hosted a panel discussion this morning here in Washington on "Prospects for Fiscal Stimulus in the U.S. Econony -- If, When, How." Moderated by former Treasury Secretary Robert Rubin, the panel discussed a primer on fiscal stimulus written by Douglas Elmendorf and Jason Furman, both of the Hamilton Project. With economic forecasters almost universal now in predicting a sharp economic downturn in 2008 -- perhaps to the point of recession -- there was broad consensus among panelists that a stimulus package, which already has bipartisan support in Congress and in the White House, should be consistent with the three Ts:

• Timeliness: Implementing a stimulus package after the recession (two consecutive quarters of negative GDP growth) would do almost no good.
• Targeting: Benefits of such a package should be directed toward individuals or businesses who would spend as much of these benefits as soon possible (examples: extension of unemployment benefits, increase in food stamp payments or a one-time tax rebate).
• Temporary: Avoid the temptation to include long-term taxation, infrastructure and social spending in the measure.

Most panelists warned that an idea floated by the Bush administration, to provide economic stimulus by extending the 2001 and 2003 tax cuts, would violate all three of the above Ts. The extension would have no impact until 2011, when these tax cuts begin to expire -- far too late to help prevent a recession. The bulk of the '01/'03 tax cut benefits are enjoyed by those in the economy with the least propensity to spend and by those more likely to invest than spend in the first place. Finally, Bush is arguing for a permanent, not a temporary extension of his '01/'03 tax cuts. Accordingly, the panel rejected the Bush proposal. Instead, the consensus was for a smaller ($100 billion), narrower (lower- and moderate-income beneficiaries), short-term (phased out within a year) mix of spending and tax components. A key question not addressed by the panel: would Bush dare veto a stimulus package along these lines rather than the one he prefers?