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Me on the Stimulus

February 14th, 2009 Leave a comment Go to comments

It might be convenient to collect things I’ve said about the stimulus bill that aren’t on this blog. For Newmajority.com:

What the American economy urgently needs is not Keynesian stimulus, but reform of the capital and housing markets, particularly in the rating agencies, bank portfolios, and government encouragement of reckless lending. That is where the problem started, and where it might have remained– with the mild recession of the first half of 2008– if Presidents Bush and Obama had reassured the American public rather than predicting doom. Whether Keynesian stimulus works is an open question in economics, but it is fairly well settled that what governments implement is not the nonpolitical stimulus that professors recommend. The various Congressional proposals so far are not stimulus bills at all. They are a mix of special- interest tax cuts and pork barrel spending with a general-interest layer of tax cutting on top. It would be better not to try to use fiscal stimulus at all.

From Politico.com after a phone interview:

Eric Rasmussen, a free market economist at Indiana University’s Kelley School of Business warns that the money could fund economically inefficient projects.

“They tend to be projects which wouldn’t get through in normal times because they wouldn’t pass the cost benefit analysis,” he said. “It’s much more prey to special interests then something like a tax cut.”

I should remember to spell out my name for people. And to ask how they heard of me. Since she calls me “a free market economists”, it’s probably from the Cato ad.

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