| Will We Be Stimulated? Economists sound off on Obama's stimulus package.
| Wednesday, April 15, 2009
|by Nick Gillespie
Outside of the obvious pork, what are the biggest problems you see with the stimulus package?
Munger: The creation of new bureaucratic and regulatory structures, restrictions on creation of liquidity. The genius of the American system, for all its flaws, has been that we can mobilize lots of liquidity quickly. Silicon Valley exists because you could sit down, make a pitch, and get $10 million that afternoon.
If we start governing finance like we govern universities, or city councils, we are going to lose that. Having committees, and a bunch of forms to sign off on, and stamps…Hernando de Soto wrote about systems like this. They strangle business, investment, and growth.
Higgs: It entails the addition of a huge increment to the burden of debt the public must bear, directly or indirectly. It redirects resources on a grand scale from uses consumers value to uses politicians value and thereby impoverishes the general public.
McArdle: Even if you accept the theory of the stimulus, the package is not well-structured. A good stimulus package should be designed to move money out the door rapidly, then stop. This program is designed to move money out the door slowly and keep going. Moreover, the vast size of the package is going to add big costs in the not-so-distant future which have barely been discussed.
McCloskey: It’s not targeted, not temporary, not timely. Especially the last. Too slow, too slow, alas.
Miron: The package is focused on increased spending and tax cuts that fail to improve incentives. I am extremely skeptical that the U.S. has $500 billion in additional productive spending, especially if done in a hurry. In most areas government spending is too high, not too low.
Meltzer: No thought is given to the medium and longerterm consequences. We are very likely to have large inflation in the next few years.
Niskanen: Nothing in the package increases the incentive to work, save, invest, or increase productivity. Any spending stimulus should be limited to increasing the demand for housing, in order to increase the value of the mortgage-backed securities that are limiting the ability of the banks to lend.
Norberg: The biggest problem is that it destroys savings by using them on projects that the majority did not think were reasonable a year ago. We take capital that would have been available to companies and poorer countries and use it to create a stimulus that will have its largest impact after the economy has already turned the corner—so that it will contribute to another round of boom and bust.
Hummel: The biggest problem with the stimulus package is the amount by which it increases total government spending, the national debt, and therefore future taxes.
Perry: First, like all fiscal stimulus packages in the past, the current one will not impact the economy at the right time for the intended stimulus effect, due to the inevitable problems of long lags. Much of the intended expansionary fiscal effects won’t happen until next year and even 2011, and it’s likely the economy will have recovered sufficiently by then so that the fiscal stimulus will be unnecessary and might actually be destabilizing.
Second, the fiscal stimulus has to be paid for eventually in the form of higher taxes, which will have a negative economic effect in the future, i.e., the “fiscal child abuse” effect. That is, any positive short-term effects of this stimulus package will be more than offset by future negative effects in the form of reduced future economic growth, decreased investments, and lower incomes.
|posted by citizen jerk @ 3:05 PM