There's No Stimulus Free Lunch
The increased federal debt caused by this stimulus package has to be paid for eventually by higher taxes on households and businesses. Higher income and business taxes generally discourage effort and investments, and result in a larger social burden than the actual level of the tax revenue needed to finance the greater debt. The burden from higher taxes down the road has to be deducted both from any short-term stimulus provided by the spending program, and from its long-run effects on the economy.
Our own view is that the short-term stimulus from the legislation before Congress will be smaller per dollar spent than is expected by many others because the package tries to combine short-term stimulus with long-term benefits to the economy. Unfortunately, short-term and long-term gains are in considerable conflict with each other. Moreover, it is very hard to spend wisely large sums in short periods of time. Nor can one ever forget that spending is not free, and ultimately it has to be financed by higher taxes.
~Chicago economists Gary Becker and Kevin Murphy, today's WSJ
11 Comments:
Becker and Murphy seemed to have no excessive fear of deficits when supporting Shrub's second round of tax cuts in 2003. Two Chicago School GOP partisan hacks masquerading as macroeconomists.
Anon.,
One also has to wonder why the Whitehouse is using a higher multiplier than the CBO to project GDP growth & jobs created or how effective the stimulus will be given the time that it will take to work its way into the economy as projected by the CBO.
Additionally, a good deal of this spending has little or nothing to do with fiscal stimulus.
How do DTV coupons for a one time switch to digital TV create long term growth and jobs? Why does Milwaukee Public Schools need 88 million in additional construction when it has 15 vacant school buildings and falling enrollment and why does this represent a lasting benefit rather than a boondoggle?
While fiscal stimulus may be necessary, does this stimulus bill really offer the best package?
DTV coupons. Are you serious q-tippy?
With the Geithner proposal now on the table, the Fed and the Treasury has now given in excess of (cash + guarantee) $10 trillion to the financial sector. The latest Bloomberg score was $9.7 trillion before the Treasury's latest $2 trillion screw-ball cockup.
It's an order of magnitude. Millions have six zeroes, trillions have twelve zeros.
While fiscal stimulus may be necessary, does this stimulus bill really offer the best package?
Shrub's stimulus package was $4.5 trillion over 8 years. You could look up the debt to the penny, if you were inclined.
"Becker and Murphy seemed to have no excessive fear of deficits when supporting Shrub's second round of tax cuts in 2003"...
We wouldn't have a deficit if it weren't for the parasites wanting federal government socialist safety net programs...
juandos aka 1.
Wow, Carpe Diem would give you 100% for answering that question on a test.
You are mad. You are not a homeowner, your "so-called" private airline pension is at serious risk of default (you'll get a benefit, but not the promised benefit and you will suck at the teat of the benevolent socialist safety net programs otherwise known as the Pension Benefit Guaranty Corp).
You have nothing other than Giselle Bundchen's underwear that you scooped on one of your flights of fantasy.
You are mad.
"You are mad. You are not a homeowner, your "so-called" private airline pension is at serious risk of default (you'll get a benefit, but not the promised benefit and you will suck at the teat of the benevolent socialist safety net programs otherwise known as the Pension Benefit Guaranty Corp)."...
Well as usual you are long on rant and short on facts...
I do have something I'm suppose to get PBGC but unlike you and your ilk apparently its not in me to steal someone else's wealth to cover my needs...
I've got no delusions about my airline pension and I've never had and the samething applies that Ponzi scam you parasites live for...
Why should I (unlike yourself) depend on someone else's wealth to bolster my own?
Why am I not suprised your link to, 'Giselle Bundchen's underwear' doesn't work?
Seriously, you are pathetic...
...and are you suggesting that 8 years and trillions in spending under GWB worked?
TARP can be justified on the basis of stabilizing the financial system racked by the most serious financial crisis since the Great Depression (a loan guarantee is not the same as spending - it may or may not be used). The U.S. economy (not to mention the global economy) depends on a functioning financial system.
Throwing money at every special interest group with a team of Washington lobbyists...don't really understand why that works for you. DTV & Milwaukee are only 2 examples of some of the pork in this bill.
Maybe we could return to the subject of this post since we appear to have very different views on the merits of the stimulus plan.
Perhaps, you could explain why you disagree with the 4 points made by Becker & Murphy.
P.S. Juandos is long gone.
I understand that it is a hard time to be a far-right economist or, worse, a fan of same (I'm looking at you, '1'). But for the love of god, how hard is it to remember Econ 101? I guess if you're a loony-right Chicago economist whose entire career recently has been proved to be wrong, wrong and then some more wrong, the cognitive dissonance probably stings.
That's still no excuse for this 2 + 2 = 3 crap.
'1', I laugh. I apologize for pegging you wrongly as a civil servant. But I only apologize a little, since it is almost laughable how close I came to the truth. You striver, you lone wolf, you John Galt clasped to the bosom of the fucking airpline industry. Ha.
Loser.
QT, off-topic, get back to use when your complaints involve more than 0.001% of the needed spending. On-topic, B&M have forgotten that when you are well below potential output and up against the zero-interest-rate bound that government spending, if effective, can result in well above base-case production. If it takes 20% of GDP to get you back to trend, and if that means you get back 5%, 10% or more.. well, where's the deadweight loss?
Of, wait. Chicago is the school where externalities don't exist.
Carry on.
wcw,
We have very different perspectives on this. The twain definitely will not meet on this question.
Frankly, the stimulus does not look good from where I am sitting. Multipliers that are exaggerated; the bulk of the stimulus not hitting until 2011 & beyond; 90 day eligibility rules for infrastructure projects that professional engineers think will lead to a total cock up.
Then one looks at Geitner's latest plan which not even Paul Krugman can buy.
Hey, glad that someone still believes in the tooth fairy.
Still waiting for a point by point rebuttal of Becker & Murphy but I guess it's easier to just dis your opponent that address and refute his arguments.
> Well as usual you are long on rant and short on facts...
LOL, Juandos, how much has that ever stopped the mouse from bloviation?
> ...and are you suggesting that 8 years and trillions in spending under GWB worked?
QT, I believe the main point is more that the problems aren't directly tied to that.
The problems are far more the result of bad social policy initiated as a ramp-up of the CRA, followed by fiscally unsound mechanisms promoted by the GSEs and falsely acclaimed as "successful and reliable" (see comments by Frank Raines of how "1% assets, backed by housing, couldn't fail", for example), then taken up (quite foolishly) by the rest of the financial industry as functional instruments.
The financial idiocy has certainly been widespread throughout Wall Street and out into all elements touched upon by Real Estate... but the seed crystal of stupidity was formed around by Congress and its damnfool surrogates, the GSEs.
There is a reason that, when that crystal broke, the rest started to fall apart. And it wasn't the Bush admin that pushed to leave it alone, it was the Dems in Congress, and their constant threats to hold their breath until they turned blue if they didn't get their way.
And yeah, as a matter of fact, I *do* blame the GOP for not telling them to F-Off in no uncertain terms, as they DID have the ability to do for at least 4 key years from 2002-2006! But one is a failure of ommission, while the other a failure of commission.
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