Wednesday, April 14, 2010

Why The Stimulus Isn't Working

Because it's not a stimulus

Keynesian stimulus has never worked.  That includes World War II.  Yes, wartime production brought us out of the depression, but government didn't create consumer demand, it was the demander.  And it demanded tools of war because our existence was threatened.  We needed the materiel that our industry produced, and we used it to a good end.

What our government is doing now has stimulated nothing.  Government can throw some confiscated money to those barely treading water, but that is not stimulus; it is a palliative.

Political payoffs to failed state and local governments border on the criminal, allowing them to dodge the consequences of their financial malfeasance for a few more years. 

Weatherization, windmills and cash for clunkers misallocate resources and distort the market.  They cause inefficiencies and delay the creative destruction that ushers in economic recovery. If you want a 21st century economy, you've got to allow the market to prune the 20th century branches.

If Government must get involved...

Building a hundred nuclear power plants would come the closest to a government "investment." (For a contrary view, see John Stossel's blog.)  It would put people to work for 5-10 years building something we need. Once built, we would reap the benefits of bountiful home-grown electricity. Unfortunately, we're going the Don Quixote route.

Eat Yourself Thin
Economics professor Mark Hendrickson has written the best summary on why Keynesian stimulators (Krugman, Stiglitz, et al) and the Central Planners at the White House are all wrong.
The massive deficit spending of Franklin Roosevelt in the 1930s didn't stop the Great Depression. In fact, despite FDR spending more money in his first five years in office than all 31 prior presidents combined. 

His Secretary of the Treasury Henry Morgenthau stated in 1939 that "[w]e are spending more than we have ever spent before and it does not work. ... I say after eight [sic] years of this Administration we have just as much unemployment as when we started ... And an enormous debt to boot!"
He also mentions Japan's failed Keynesian decades and reminds us that economic history did not start in the 1930s. We had crashes and panics before FDR came along, and we got out of them without government intervention.  Cato has a very short example Here

Read these informative articles and do your part to push back against the liberal fairy tales.  "Spend your way to prosperity" makes as much sense as "Eat yourself thin."


Fredd said...

Asking our current structure of government to quit spending (and yet simultaneously touting 'growth')is like asking an alcoholic to quit sucking down the devil's juice: both situations require an intervention of some kind.

Silverfiddle said...

Indeed Fred. The very people who are drunk with power would have to relinquish it. Doesn't give one hope, does it?

Linda said...

TERM LIMITS?? We need to get back to public servants whose goal is to actually serve their country. Removing the intoxication of power and profit from the job may result in only the truly dedicated running. The unfortunate downside to term limits would be the limitations that limits place on the honest and the talented.

Do you think it is implausible to even expect honesty and dedication from a politician?

Silverfiddle said...

I see devolving responsibilities (and the money) back to the state capitals as prime.

Putting the federal government on a diet and getting it back to only it's constitutional duties would remove the honey pot from DC. At least then the vultures would have to swoop down on 50 capitals instead of one.

I think doing this would also weed out the greedy and venal, since there is no profit gain in serving in Washington.

the reason I am not a fan of term limits is because it leaves behind a permanent mandarin class of congressional staffers. This unelected group would end up running the country

Leticia said...

What needs to be done is cut congressional and senate salaries, to be begin with, take away their private insurance, build things that actually work.

Their power should be limited and furthermore, they should not be allowed to hold a seat for more than four years, and that goes for judges and Supreme court judges.

It should be the power of the people not the power of the government.

innominatus said...

>>>At least then the vultures would have to swoop down on 50 capitals instead of one.

Yep. And the separate states can't run bottomless deficits, so the states would soon have to run lean, too. Win/Win.

Always On Watch said...

Government can throw some confiscated money to those barely treading water, but that is not stimulus; it is a palliative.

Those of us who have managed to stay afloat in these tenuous economic times are being punished, too.

Talk about inversionsim! We're living it on so many levels in the 21st Century.

WomanHonorThyself said...

Because it's not a stimulus..if that doesnt say it all!!

Most Rev. Gregori said...

At least Obummer's stimulus is providing jobs for the poor folks over in China, India and other third world countries.

Capt. Fogg said...

I'm not an economist, but then neither is anyone here. The subject is more of a cock fight than a science anyway as far as I'm concerned, and I prefer the lessons of history to the cackling of professors -- but if FDR's spending (modest, I think, by modern standards) had nothingto do with a recovery, the graphs I've seen showing GDP and employment year by year, rising and falling in step with that spending would be puzzling if there weren't some correlation. If the preceding cut in the top bracket was irrelevant to the boom and collapse, I'd be more surprised. The Great Depression in fact is a complex subject you could spend a lifetime on and not fully understand, so forgive me if I don't think a glib and tendentious reference serves the argument at hand all that well.

And then we haven't had a president who wasn't accused of being a spendthrift since Washington and I'm not too sure about him either. I've become a bit deaf to that as well.

If this were a reasonable inquiry or discussion however, and not just another Burning Man knock-off, we'd be talking about coefficients of correlation and tariffs and tax rates and bank failures and the FDIC and about why spending on WW II is different than the borrowing for Bush War II, but that would be no fun and would be far over the head of the chorus here. More fun to trot out the usual scapegoats and have at it with the usual muck and slop.

Let's just say "Obummer" and giggle like self-important know it alls! It's all about feeling good anyway, isn't it?

Vide Supra:

"At least Obummer's stimulus is providing jobs for the poor folks over in China, India and other third world countries."

Oh yes, Obummer certainly is behind the outsourcing of jobs by American corporations that's been going on for decades as well as Bush's no-bid contracts with offshore corporations that pay no US taxes -- of course he is, says the wrong reverend, illustrating what the word 'preposterous' means along with the conservative principle of sticking to pure reason, verified facts and never, ever stooping to hollow mockery, baseless and shameless name calling like those "libs" do.

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