In the first half of his administration, the Bush Administration demonstrated effectively that a tax cut can work as a stimulus.
The caveat to such a tax-cut stimulus, though, is that a tax cut needs to be followed (at some point) with spending cuts.
I contend that part of our current economic malaise is that the Bush tax cuts were not followed by spending discipline. The markets know that taxes must rise to pay deficits.
The video below suggests a payroll tax vacation. I contend that such a vacation fails as a stimulus because businesses plan for the future. They know that the tax will return and is likely to return at a higher rate. As such it will retard future investment.
Our poor little government has piled up a massive load of entitlements and non-discretionary spending that the market knows we have all but unsolvable budget problems for the future. A conservative mechanism to stimulating the budget at the moment would be to take steps that reduce future costs or future entitlements.
There is some infrastructure spending which reduces future costs.
Obama did well by claiming that there will be a cut in deficit spending by 2013 (yahoo).
Of course, I think our economy has worn out the effect of all stimulus bills. The wild ride on Wall Street is a sign that our economy is starting to look and behave like a crack addict.