Yes, 40 percent of the Obama stimulus package will be a tax cut. It’s already a talking point that "the Democrats have lost their nerve" but the reality is not so devious. Obama wishes to deliver on his pledge to cut taxes (always electorally popular) and upon close inspection the economic team probably hasn’t found a lot of first-year stimulus spending it likes. That leads to this obvious policy conclusion and of course it is very good news. No, I do not think these tax cuts will drive recovery but a) less money will be wasted, and b) it shows that the Obama team is willing to flinch and be realistic, not just as a final compromise but indeed as an opening gambit.
The best way to think about fiscal policy is to judge, in advance, what is actually likely to come out of the process. The alternative approach is to recommend policy based on one’s personal sense of what should be done and then to blame all the forces which stop that from happening. (Rarely do these people stop to ask whether their political views are robust to the presence of significant opposition.) A lot of people on the left are disappointed, but in my view what is coming out of the process is, so far, above average.