Thoughts on First Stimulus As Debate Begins on Second
October 8, 2009
The idea is pure, long-discredited Keynesian economics, the economic equivalent of 18th-century bloodletting. First you bleed the patient – i.e., economy, by taking capital out of it through increased debt, then you begin returning the money a little at a time by turning it over to lawmakers, bureaucrats, governors and mayors to spend on a wish list of pork-barrel and income-redistribution projects.[…]
Stanford economists John Cogan and John Taylor recently went over the stimulus plan with a fine tooth comb in search of its results. “Simply put, there is no evidence that the stimulus package has helped the economy. Virtually all of the improvement in the economy’s growth from the first to the second quarter is the result of private investment in plant, equipment and inventories that are unrelated to anything in the stimulus package,” Mr. Cogan told me.
The editorial also quotes our podcast with economist Robert Barro:
“I think it’s a terrible piece of legislation, really on both sides, that is the expenditure side and on what they purport to have as a tax reduction side. I don’t think it’s going to help the economy on either dimension,” Mr. Barro told the nonpartisan Tax Foundation in April.