Deal Or No Deal

Looks like the Democrats and Republicans got together and decided on how much money to give away:

Democratic and Republican congressional leaders reached a tentative deal Thursday on tax rebates of $300 to $1,200 per household and business tax cuts to jolt the slumping economy.

Congressional officials close to the negotiations said House Speaker Nancy Pelosi and Republican Leader John Boehner of Ohio reached agreement in principle in a telephone call Thursday morning [...]

Pelosi, D-Calif., agreed to drop increases in food stamp and unemployment benefits during a Wednesday meeting in exchange for gaining rebates of at least $300 for almost everyone earning a paycheck, including low-income earners who make too little to pay income taxes.

Adding to unemployment insurance is typically the best way to get people spending money quickly and injecting cash into the economy. I know they're lucky duckies but it's true. So what has been dropped from this negotiation is exactly what can stimulate the economy. Krugman writes:

As I pointed out in an earlier post, economic theory — Milton Friedman’s theory! — suggests that if we want stimulus funds spent, they should go to people in temporary economic difficulty who are likely to be liquidity-constrained. But it appears that most of the measures that would do that — benefits to the unemployed, food stamps, aid to state and local governments — are being bargained away. Even the tax credit is apparently not fully refundable, so those who need it most, and are most likely to spend it, won’t get the full amount.

Furthermore, the dividing line on the rebate cuts right at the middle class in blue states that have a high cost of living.

Sigh. These guys can't even get giving away money right.

UPDATE: Apparently almost half of this stimulus package about $70 billion, goes to corporate tax breaks.