Tuesday, February 19, 2008

Congress and the Pros/Cons of Artificial Stimulus: They Feel Strongly Both Ways

Let’s hear it for irony. In almost simultaneous events last week, Congress attacked baseball players for taking performance-enhancing drugs while at the same time supporting artificial and temporary stimulus for the U.S. economy no matter what the long-term costs.

Many people don’t like professional baseball players using steroids because they mask the underlying ability of the player. They taint the results.

But so does artificial economic stimulus. Monetary policy accommodation can help people feel wealthier for awhile, but it cannot create wealth. Printing money does not make anyone wealthier. If it did, then counterfeiting should be made legal and everyone in the world would then be wealthy. The same is true for tax rebates. If they really could increase wealth, then why not make them much larger and much more frequent?

In the end, trying to increase spending without increasing the country’s productive capacity is a fool’s errand. Boosting demand without boosting supply causes a misallocation of resources. Like with steroids any boost is temporary and risks longer-term economic problems.

Read the full article here from First Trust Portfolio economists Brian Wesbury and Bob Stein.


At 2/19/2008 2:37 PM, Anonymous Anonymous said...

Boosting demand without boosting supply causes a misallocation of resources.
Really? Like this.


To bail out insolvent banks like these.



Post a Comment

<< Home