The rich are harder to stimulate than the poor

By M.S.

MEGAN MCARDLE correctly notes that I missed something important in interpreting the CBO figure showing that extending the Bush tax cuts for income over $250,000 doesn't significantly raise employment. To wit, the gross value of the tax cut for income under $250,000 is much larger than that for income over the line. CNN estimates the lower-income hike at $308 billion and the upper-income hike at $75 billion. That, Ms McArdle writes, is probably the main reason the CBO chart doesn't show a significant difference in employment boost between tax cuts with or without the high-income part; it's a "rounding error".

This is a fair point, but the CBO also thinks tax cuts for high earners boost employment less than those for low earners because low earners spend more of their tax cuts. In his full comments, Doug Elmendorf notes that "increases in disposable income are likely to boost purchases more for lower-income than for higher-income households," and points to several papers on that issue, including one by Jonathan A. Parker and others titled "Consumer Spending and the Economic Stimulus Payments of 2008". Here's their comparison of how high and low earners spent those Bush-era $300-per-person stimulus checks: