Tuesday, January 13, 2009

Why Keynesian Stimulus Plans Don't Work

1. At the national level (Cato's Dan Mitchell explains, see longer version here):



2. Or at the state level, watch a video of the Mackinac Center's investigation of the Michigan Film Incentive program, a state-level Keynesian stimulus program being implemented in Michigan.

8 Comments:

At 1/13/2009 11:09 AM, Blogger misterjosh said...

Attempt to be helpful: you spelled stimulus wrong

 
At 1/13/2009 11:15 AM, Blogger Mark J. Perry said...

Misterjosh: Yes I did, thanks for pointing it out, it's fixed now!

 
At 1/13/2009 11:49 AM, Anonymous Norman said...

There are two parts to Keynesian Theory. The first was for the government to fill the spending gap. Polititicans love, love, love this part. The second, was that after the economy was on its feet to run surpluses lest we have inflation. Politicians don't even know about this one and even economists avoid its utterance like the Plague.

 
At 1/13/2009 12:45 PM, Anonymous Mika said...

(1) The video was the best presentation I've ever seen or heard critical of Keyensian theory.
(2) We can always count on Cato and Mackinaw Center to beat this drum, but we can't rest assured that they are capable of an entirely thorough, fair and balanced analysis of the entire topic. There are as many authoritative and highly respected economists who offer a different opinion with an equally compelling argument. . . . It has been frequently reported that a majority of American economists support a spending stimulus package. Is there any way of knowing if that report accurate, professor?
(3) Conservatives should find solace in the fact that almost half of Obama's plan calls for trickle-down tax breaks for high -end tax payers.
(4) It's always easy to cherry-pick a single government-subsidized project (film incentive)for ridicule, but let's look at the big picture, e.g. was the Interstate highway system a boondoggle? The latter kind of program is what the new administration is intending.
(5) In the short run, might it not be better - more humane - to employ 2-3 million in government subsidized jobs than to allow these people to starve and/or create a tsunami of government welfare costs (something conservatives and libertarians like even less)? Two birds with one stone: The national infrastructure urgently needs to be rebuilt anyway! Furthermore,the contractors employing them will prosper encouraging their reinvestment.

 
At 1/13/2009 1:24 PM, Blogger 1 said...

"Conservatives should find solace in the fact that almost half of Obama's plan calls for trickle-down tax breaks for high -end tax payers"...

What?!?!

On what planet is that suppose to happen?

From the N.Y. Daily News (Wednesday, September 19th 2007, 4:00 AM): WASHINGTON - Barack Obama offered a plan to cut income taxes by $80 billion for workers, seniors and homeowners by boosting the take from wealthier Americans.

"It's time for policies from Washington that put a little wind at the backs of the American people," the Democratic presidential hopeful said in a speech to the Tax Policy Center here.

Obama said the current system is skewed toward the benefit of the rich at the expense of the working middle class. The tax code is "too complicated for ordinary folks to understand, but just complicated enough to work for someone who knows how to work the system," he said.

 
At 1/13/2009 2:24 PM, Anonymous Anonymous said...

"Conservatives should find solace in the fact that almost half of Obama's plan calls for trickle-down tax breaks for high -end tax payers."


Complete nonsense. Obama plans to redistribute wealth in the form of welfare payments, euphemistically calling them "tax cuts", from actual tax payers to those who currently pay little or no federal taxes. If you do not pay taxes and receive a check in the mail, it's not a "tax cut", it's a welfare payment.

I know, I know, these poor unfortunates pay "payroll taxes", and Obama has said the checks will represent a cut in "payroll taxes" for the 40 plus percent of the population who currently pay no federal taxes. Liberals used to call this raiding the Social Security Trust Fund. If Obama has no plan to make up the short fall to Social Security and Medicare than he will forcing these Ponzi schemes into an earlier crisis. One, no doubt, his worshipers in the media will blame on someone else.

 
At 1/13/2009 5:52 PM, Blogger PeakTrader said...

I'm sure the video is an oversimplification. Obviously, Keynesian economics worked well in the 1970s to prevent another deep depression, similar to the 1930s and 1870s. We also know laissez-faire economics works well, since there were so many economic booms and busts before Keynesian economics.

 
At 1/13/2009 9:05 PM, Anonymous Mika said...

1said, my God, your quote is from Sep 2007! - incredibly antiquated, even if accurate at the time. You're out of touch, man. Haven't you been following this over the last three weeks?

"They (Democrats) were especially critical of a proposed $3,000 tax credit FOR COMPANIES that hire or retrain workers. . . . About $300 billion of that would be TAX CUTS or refunds for individuals and BUSINESSES." (CNBC - 1/8/09)

 

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