Economy: Russ Asks If the Stimulus Will Help

Russ Roberts over at Cafe Hayek posted this.

I have started asking people I encounter whether they think government spending a trillion or so extra dollars is going to be good for the economy. The front desk clerk at my hotel—a marketing major—gave me a very honest, "I don't know." The other four people I asked, all under the ago of 30, said they thought it wouldn't help. My favorite response: They wasted the other money [me: a reference to the TARP, I think]. Why will this be any different."

I encourage you to start asking people. Do you think the stimulus will help? Ask without malice. Without sarcasm. Without an edge. Pure curiosity. See what they say. I think most people are very skeptical. The people in favor of this plan are some economists (calling Bryan Caplan), governors in states that are broke, and the politicians who will spend the money.

Maybe it can be stopped if enough people think it's a waste.

I have an idea on how to proceed. In the meanwhile, start asking and educating.

I am curious what he is up to. Anyway, what do you think? Will the "stimulus" help the economy? Tell me what you think.

Comments, suggestions, and questions can be directed to test.veeschay@gmail.com

Economy: Boudreaux on Deficit Spending

Don Boudreaux had this to say in a letter to the Chicago Tribune (see it here):

President-elect Obama prescribes fiscal stimulus as the cure for America's ailing economy ... Well let's see.

With the exception of a few years during the Clinton administration, the U.S. has run annual budget deficits continuously for the past four decades. And from 2002 through 2008, Uncle Sam ran budget deficits each year, totaling $2.13 TRILLION dollars. That's a frightful amount of fiscal stimulus, and yet the economy today is struggling.

Now with the bailout, the budget deficit for 2009 alone is projected to be close to $1 trillion - nearly seven percent of GDP, a figure much higher than at anytime since WWII. If deficit spending were good for the economy, Americans would now be, not on shaky ground, but in Shangri-la.

Comments, suggestions, and questions can be directed to test.veeschay@gmail.com

Economy: Job Creation

Here's a line clipped from a Cafe Hayek post by Russ Roberts; read the rest here.

...it's easy to create jobs. The hard part is creating productive jobs. Jobs alone do not create prosperity. Creating wasteful jobs reduces our standard of living.

Comments, suggestions, and questions can be directed to test.veeschay@gmail.com

Economy: Kling on the Stimulus

Okay, I'm back. Having survived the holidays, even trying to shed some of the fat I gained from the sugary holiday diet by playing a little basketball this morning I think that I am ready to start posting again. Here's one that jumped out as I scanned the internet; it is by Arnold Kling, and you can find it here.

Kling's two points, as I see them, are this: first, if a solution doesn't work, the same solution in greater amounts won't likely work either. Second, why do we think that any one of the "experts" would have the wits to handle spending the billions of dollars that is being called for.

On his first point he says:

I was reminded of the Battle of the Somme, one of the worst policy blunders of all time. Having experienced nothing but failure using offensive tactics up to that point, the Allies decided that what they needed to try was....a really big offensive. Just as Feldstein and Stiglitz [the "experts" in his article] pay no attention to the on-the-ground the housing market, the British generals ignored the impact of machine guns on men advancing over open fields.

As I see it this has been brewing and bubbling for years. The "free market" gets blamed every time something goes wrong, but it was government meddling that creates many of the problems. So the calls for more government spending to stimulate the economy is wrongheaded. Let those who make the financial mistakes pay for them. Let the people help that want to, and leave the rest alone.

On his second point he says:

How many people will have meaningful input in determining the overall allocation of the billion stimulus? 10? 20? It won't be more than 1000. These people--let's say that in the end 500 technocrats will play a meaningful role in writing the bill--will have unimaginable power. Remember that what they are doing is taking our money and deciding for us how to spend it. Presumably, that is because they are wiser at spending our money than we are at spending it ourselves.

The arithmetic is mind-boggling. If 500 people have meaningful input, and the stimulus is almost $800 billion, then on average each person is responsible for taking more than $1.5 billion of our money and trying to spend it more wisely than we would spend it ourselves. I can imagine a wise technocrat taking $100,000 or perhaps even $1 million from American households and spending it more wisely than they would. But $1.5 billion? I do not believe that any human being knows so much that he or she can quickly and wisely allocate $1.5 billion.

I will only add one of my favorite quotes from Hayek: "All political theories assume, of course, that most individuals are very ignorant. Those who plead for liberty differ from the rest in that they include among the ignorant themselves as well as the wisest."

Comments, suggestions, and questions can be directed to test.veeschay@gmail.com