Saturday, January 26, 2008

Why the Stimulus Shouldn't Stimulate You

"What makes you think that this tax rebate will put anyone to work? The idea behind the stimulus deal is to give people tax cuts so they'll feel richer and spend more. But government can't make people richer on average; all it can do is shuffle wealth around. To pay Peter, you must tax Paul (or at least promise to tax Paul in the future, when your debts come due). Peter spends more, but Paul spends less.

Moreover, even if you do somehow manage to increase spending, that doesn't mean you'll put Americans to work. More likely, you'll put Asians to work producing goods for the U.S. market.

President Bush seems to have become confused on this key point because he misunderstands supply-side economics. He has vaguely remembered that tax cuts put people to work, but he's forgotten that only marginal tax cuts put people to work. Non-marginal tax cuts -- such as the ones in the stimulus package -- have exactly the opposite effect, when they have any effect at all."

~Economist Steven E. Landsburg in Sunday's Washington Post


At 1/26/2008 8:04 PM, Blogger Thomas Coolberth said...

I'm either paying off a credit card or investing in gold with the money.

The last thing I would do is buy something else.

At 1/26/2008 10:39 PM, Anonymous Anonymous said...

It is not the money in the pocket that will stimulate the economy it is the hope in the heart that the stimulus package is working to turn the economy around.

The hope will, in turn stimulate people into getting off their asses, working, starting businesses, investing and spending. Then voila the economy is stimulated even though the actual stimulus package was a true negative.


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