Friday, February 19, 2010

If One Leech is not Enough, Try Two

In response to concerns that unemployment remains high despite the stimulus, President Obama said this:
"You can argue, rightly, that we haven't made as much progress as we need to make when it comes to spurring job creation." ... "That's part of the reason why I expect Congress to pass additional measures as quickly as possible."
The President's response assumes that the first stimulus worked, just not enough. That is possible, but maybe the Keynesian model that underlies the case for stimulus is just wrong.

Non-Keynesian perspectives suggest that additional spending or poorly designed tax cuts will harm the economy by distorting resource allocation.  More broadly, stabilization policy instills a belief that governments can moderate recessions, which encourages risk-taking and larger booms and busts.  A steady stream of  policy "remedies" creates uncertainty that discourages productive activity.

So maybe the treatment is worse than the disease.

6 comments:

JoeMac said...

Brad DeLong has been touting the stimulus's success during the last few days on his blog, lots of articles and statements on it. It would be great to hear your opinion on it.

I'm curious about the following...

1. What percentage of jobs jobs created/saved were public sector jobs?

2. Of the private sector jobs, how many are permanent as supposed to temporary jobs?

3. How much money spent per job?

Howard said...

It's demand, stupid and any "cure" that doesn't create demand is pissing into the ocean. Here's a way: the government buys up every foreclosure and then knocks down the houses and strips all the appliances, furniture, and copper wiring and disposes what can't be sold. If we got a million or so houses off the market construction would take off.

Anonymous said...

re: Howard

I've got another one for you - why doesn't the government just break everyone's windows? I bet the glass business will just take off...

Anonymous said...

Seems to me I've heard about the "broken window" theory somewhere...maybe it was in my French class...

Badger said...

Poor Brad... It must be hard to have to support this poor excuse of a government just because he doesn't want to admit that he's been wrong all this time...

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