Destroying progressive economists with half his brain tied behind his back
The bottom line:
Of the 34 Organization for Economic Cooperation and Development nations, those with the largest [government] spending spurts from 2007 to 2009 saw the least growth in GDP rates before and after the stimulus.
The four nations—Estonia, Ireland, the Slovak Republic and Finland—with the biggest stimulus programs had the steepest declines in growth. The United States was no different, with greater spending (up 7.3%) followed by far lower growth rates (down 8.4%).
The liberal economists will no doubt say “But it would have been so much worse without the stimulus.” Such an argument ignores the facts of this case: mo’ stimulus = mo’ economic shrinkage. It also ignores the fact the “stimulus” has to be repaid.
…the truth is that government spending does come with debits. For every additional government dollar spent there is an additional private dollar taken. All the stimulus to the spending recipients is matched on a dollar-for-dollar basis every minute of every day by a depressant placed on the people who pay for these transfers. Or as a student of the dismal science might say, the total income effects of additional government spending always sum to zero.
I’d suggest that given the bureaucratic transaction costs and poor “investment” choices the government makes (think Solyndra, GM, et al) that the value gained is less than zero. And there’s still the moral hazard of mo’ stimulus:
Meanwhile, what economists call the substitution or price effects of stimulus spending are negative for all parties. In other words, the transfer recipient has found a way to get paid without working, which makes not working more attractive, and the transfer payer gets paid less for working, again lowering incentives to work.
When liberal economists (“experts” like Paul Krugman or Brad DeLong—how often we confuse credentials with knowledge) need to make a point, they often pull out a model or truncate the data. And as with
global warming climate change climate chaos, all that’s required to get the desired results is to change the model’s algorithms and/or its inputs.