Tuesday, February 10, 2009

Federal Stimulus

Gary Becker and Casey Mulligan have a good post on the 'stimulus' package in today's WSJ:
The evidence of past expansions of government programs is just the opposite. Once created they tend to survive and grow over time, even when the increases initially were said to be temporary. The underlying reason for this is that interest groups develop around new and expanded programs, and they lobby to keep and expand those programs.
Whatever the merits of other government spending, the spending in this package is likely to have less value. A very large amount of money will be spent quickly over a two-year period: $500 billion amounts to about one-quarter of the total federal government annual spending of $2 trillion. It is extremely difficult for any group, private as well as public, to spend such a large sum wisely in a short period of time.

I can't agree more, and so find this all so depressing. But I don't blame Obama or Democrats per se, as they are giving the US what it wants. I just think what most people want is not in their best interest, like voting for rent controls.


Anonymous said...

I honestly believe that the primary reason equity markets have taken such a hit is the expectation that a pricey government stimulus like the one we are about to have foisted upon is will be a permanent drag on growth.

All things considered, I am pretty happy with what has gone on at Treasury, and I think that those actions alone would turn the economy around roughly as quickly as is possible given the need for banks to deleverage. It is not even clear that the Treasury's investments on the whole are bad ones (AIG excluded). The fiscal stimulus on the other hand is a clear loser.

Matthew Gunn said...

By Casey Mulligan, you mean Kevin Murphy?