Tuesday, January 27, 2009

Cato Institute mounts full frontal attack against the stimulus

We may not get it!

“Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policy makers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth. Below you’ll find some recent Cato work on “stimulus” packages.”

Check it out at the link here.

They are extremely well organized and funded. Plus, opposition by Republicans in Congress mounting. And, inexplicably, Obama feels like he has to form a bipartisan consensus on this, despite getting nearly 64 million votes, a mandate, Democratic control of Congress and zero need to appease Republicans.

All we need now is another terror attack on U.S. soil and the folks who voted for Obama will be begging to have Bush back!


googleheim said...


but could not the unlimited backing of the FDIC by the Fed Treasury require at least 3 months to get the IOUs into full swing
if more banks fail and the FDIC is sapped up ?

in Argentina, it took months to reopen the banks and there were limits on withdrawals.

with the way things are looking here, i don't think anyone is acting fast enough nor could act fast enough to juice up the FDIC to respond.

is the FDIC backing accomplished by the Fed's ability depositing of accounts ?

i thought that nobody understands that ... even the Feds ???

mike norman said...

Sure, anything can take time when you're talking about having to get approval. Look at what's happening with the stimulus. It should have been done last September.

Johnny Mac said...

Will the stimulus work at all if most of the spending is going to social programs and the like? From what I have seen, the majority is not going to "traditional Keynsian"items.
Also, I have heard that the $800B comes with roughly $300B of debt service. Is this a true debt or more political speak? I am trying to grasp the your view vs what I have believed most of my life. Thanks for the education.

mike norman said...

I'm not sure Keynes stipulated what kind of spending as oppsed to simply spending. Clearly, higher spending on education, health care and unemployment insurance benefits certainly shifts the nature of our economy, where those things benefit relative to other areas, however, there is a ripple effect. (For example, higher unemployment insurance benefits also help local vendors and proprietors in areas that have the highest numbers of unemployed.)

I think the thing to remember about stimulus is that if the economy is losing five or six percent of output, then you want to stimulate it by at least that much again. In so doing the economy may not look exactly like it did before (less housing, less financial sector driven; more education, health care sector driven, etc)

I'm not sure what you mean by "$300 billion of debt service." The gov't currently pays out about that much each year, but remember, interest paid by government is a component of national income and private savings. Paying interest to people raises their overall income, which in turn increases the level of savings. That's not a bad thing.