"Then a stimulus of about 4 ppts of GDP -- roughly $580 billion -- will bring output up to about potential. "

Menzie Chinn on Econbrowser with some thoughts about the stimulus:

"Then a stimulus of about 4 ppts of GDP -- roughly $580 billion -- will bring output up to about potential. The bigger the tax cut element skewed toward higher income deciles, the larger the required stimulus. (However, I'm optimistic that with the new economic team of Summers, Orszag, Romer and Geithner that's been selected, the package will indeed hew to the idea of maximizing the stimulative impact, which is consistent with targeting the lowest and middle income groups for tax cuts/rebates [5], [6].)

And if stimulus across countries can be synchronized, then so much the better (especially since it would be hard to spend at $580 billion in one year).

By the way, the reason why I don't say "coordinated fiscal policy" is because, in the lexicon of academic economists, this would mean commitment to some sort of rules so that Nash outcomes can be avoided. See Frankel and Rockett (1986). In this discussion, I have in mind a more modest, one-shot, event, since I'm not sure a coordination is feasible over the longer term.

On a side note, I've just been watching Nancy Pfotenhauer on Larry King characterizing the new Obama economic team as "not change" because they are centrists. I think she misses the point entirely (not surprising). The "change" is not a matter of the economic ideology of the new team members -- rather the "change" is bringing in people who value expertise and evidence-based policymaking over ideology and dogma. That is, the end of PoMo Macro policymaking."

Her figure is probably close to what will be spent, over two years. At least, as of today.

"even after allowing for further easing, that reducing interest rates alone will not be enough. "

The FT on a stimulus package:

"Credit markets are recovering, but are still gummed up, and banks are being slow to pass on rate cuts to borrowers. Households and businesses are not spending. Even those with access to credit are proving loath to use it. Although falling commodity prices will help stimulate some growth, monetary policy may be rendered ineffective and, as the IMF now believes, a fiscal stimulus may be required.

Because of the weak fiscal positions of some Group of 20 industrial nations, they cannot afford to spend much. It is, therefore, especially important that cash is used well. Effective stimulus means the money must be spent immediately, and not hoarded. Stimulus programmes should also be temporary – they must not keep boosting the economy after recovery. Credibly temporary policies will also reassure markets that governments will be prudent again one day soon, and will not default on their debts.

Politicians may try to push for stimulus funding to be diverted to their own pork barrels. Even if the measures they want would normally be desirable, however, they must be assessed on whether they encourage economic activity. The US needs to increase investment in its infrastructure, but doing so now would offer little help to the economy in time to cope with the downturn.

By contrast, a flat tax rebate would normally be a lousy way to cut taxes, but could be an effective stimulus. Rebates in the US this year were ineffective, but a co-ordinated response, combined with falling input prices, might not be. Because of the difficulties in obtaining credit, rebates are more likely than usual to be spent quickly."

So, the stimulus:

1) Not a lot of money ( Correct )

2) Money used well ( Well, yes )

3) Money spent immediately ( That's a stimulus )

4) Must be temporary ( Correct )

5) No pork ( Correct )

6) No infrastructure ( Disagree )

7) Tax rebate ( Disagree )

Basically, I don't feel that 7 will work.