Not ‘every economist’ believes government can stimulate –
Commentary by Scott Beaulier, Allen Lynch, William S. Mounts
Editor's Note: This commentary was published in
The Macon Telegraph Opinion page February 28, 2009.
Last week President Obama’s Economic Recovery Act was signed into law. The bill amounts to nearly $790 billion in new spending, and it is the latest addition to more than $8 trillion of economic rescue spending. Eight trillion dollars is a difficult number to put in perspective, but in inflation-adjusted dollars, it is comparable to building more than 10,000 Hoover Dams or fighting World War II twice. Or, it translates into $25,000 in tax rebates for every American man, woman, child, and person in prison.
President Obama describes the $790 billion stimulus bill as “the last chance for the economy,” and he described not passing the bill as “catastrophic.” But, was this bill really necessary? Will it “jump start” the economy? Or, is it more “politics as usual”?
We feel Mr. Obama has not answered the tough questions, and he has also lumped all economists together and found agreement among them when, in fact, there are plenty of dissenters.
When asked tough questions, President Obama admits he does not know if parts of the package will work. He still has not answered the question of how his stimulus is any different than the “failed” stimulus of the Bush administration. While the president is trying to control expectations, it is pretty clear what the package will do.
First, the stimulus must be financed through taxation or borrowing. Since the stimulus package is in addition to what the federal government is already doing, it requires additional taxes and/or additional borrowing to get the required money. Therefore, the first effect will be to take money from people in some way and then give it to the government. This effect is pretty obvious.
Second, the federal government will spend the money in, we hope, the ways that are described in the bill. Miami, Fla., will get a new transit system; a boardwalk around Lady Bird Lake in Austin, Texas will be completed; and many dog parks will be financed with stimulus money. We’re dead serious: The bill is loaded with federal funding for Fido’s parks around the country. The limited resources of the economy will be directed to uses determined by the government. This shift from private to governmental decisions is also pretty obvious.
The third effect is not so obvious. Had the government refrained from spending $8 trillion, the money could have been allocated differently. Every economist — yes, every economist — calls this the opportunity cost of an action; by choosing to spend, we are necessarily giving up other alternatives. It’s a basic economic principle that Obama and his advisors seem to have ignored, and it says that all we will ever see is his spending; we will never see the outcomes of less or no spending.
Thanks to Obama’s stimulus bill and the many unnecessary government interventions by his predecessors in the White House, the fundamental nature of the U.S. economy has been altered.
America’s future as a lamp of liberty looks dim, and the U.S. will soon fall out of the Top 10 list of most economically free nations in the world. We will be less free, and the financial strain from the government’s fiscal foolishness will be felt for centuries. Over time, our economy will shift from one based on private investment to more public spending, which will result in slower long run economic growth.
For these reasons, we strongly object to Obama’s argument that “every economist” agrees that more stimulus is needed. As trained economists, we are unable to imagine the government being able to stimulate an economy, and we are deeply concerned about the future burdens our promises today are creating.
Governments are not there to provide a helping hand to the “invisible hand” of the market. Instead, they are a grabbing hand looking to reallocate resources from one person — in this case future generations — to another. We wish Obama and his advisors would think about adopting a more realistic and less romantic notion of government.
Sitting in our offices and watching the crisis unfold, we have been opposed to every bailout measure Obama and Mr. Bush have introduced. We wish the president could reverse course and stop intervening into the market, but we know that will not happen.
Instead, our request is more simple: Please watch what you say and revise your “every economist” generalization to “every economist less three.”
Scott Beaulier is Department Chair of Economics at Mercer University.
Allen Lynch is Associate Professor of Economics at Mercer. William S. Mounts is Interim Dean of the Stetson
School of Business and Economics at Mercer.
Not ‘every economist’ believes government can stimulate - Macon Telegraph 2/28/09
Perils of Democracy, Part 5 - J.A. Davis & Steve Scroggins
Economic Worldviews - X-Files parody
Socialism, Republican Style - Michael Tennant
Instead of Stimulus, Do Nothing---Seriously - Robert Higgs
Ticking Time Bomb Explodes, Public Is Shocked - Robert Higgs
The Grabbing Hand - Government Pathologies and Their Cures - Andrei Shleifer & Robert W. Vishny
Why Did This [meltdown] Happen? - Thomas DiLorenzo
Obama's Stimulus - Phyllis Schlafly
America's biggest problem is big government - Dr. Gary Wolfram