Wednesday, January 14, 2009

Economists on Stimulus Package

Here's what the skeptics say:
“A stimulus package of this magnitude is likely to contain many projects that are poor investments.”
‐ Alan Viard,
Resident Scholar, American Enterprise Institute

“Government spending does not create incentives for labor, innovation and investment. Instead of
spending $1 trillion in Washington, let Washington forgive $1 trillion in tax revenues to create incentives for
millions of individuals and firms to get the economy going again, one dollar at a time.”
‐ Donald Luskin
Chief Investment Officer, Trend Macrolytics LLC

“I have concerns about a stimulus spending bill. I think there are two criteria that may justify additional
spending: 1. The spending passes a long-term cost-benefit test. That test may be less rigorous now that
we are in a period of extremely low interest rates, but it should still be passed. 2. Alternatively, the
spending can be implemented very quickly and will have a significant impact on employment. I highly
doubt there are $1 trillion of new projects that meet one or both of these tests. I would rather see a
temporary suspension of some or all of the payroll tax.”
‐ Philip Levy
Resident Scholar, American Enterprise Institute

“The only way Congress can spend money is to extract it from the private sector – either by taxing it,
borrowing it, or seignorage. The question then becomes: will Congress spend that money more wisely than
the private sector would have spent it? The answer appears to be no. Congress typically spends
according to its political priorities, not economic priorities.”
‐ Michael Cannon
Cato Institute

“It is time for voters to wake up to the fact that government cannot create jobs. It can only shift jobs from
one part of the economy to the other. It is entrepreneurs who create jobs, and it is consumers who judge
whether those jobs are the best jobs to be created. The government contributes best by establishing a rule
of law and protection of property rights that allows entrepreneurs and consumers to act in their best
‐ Antony Davies
Associate Professor of Economics, Duquesne University

“The stimulus plan will most probably turn quickly into pork spending. Marginal rate tax cuts would be a
much more effective way to stimulate demand along with cuts in the capital gains and corporate tax rates.
Evidence shows that marginal tax cut multipliers are much higher than spending multipliers. In addition the
Fed is still not out of ammunition.”
‐ Joseph Zoric
Associate Professor of Economics, Franciscan University of Steubenville

“Fiscal stimulus may have symbolic value and certainly does provide an expedient for distributive politics,
but there is NO evidence that it contributes to GDP or economic growth more broadly.”
‐ Edward Lopez
Associate Professor of Law and Economics, San Jose State University

“The empirical evidence overwhelmingly rejects federal government deficit spending as the best method for
stimulating the economy, and is generally unsupportive of it having any stimulus effect at all.”
‐ Justin Ross
Assistant Professor of Economics, School of Public and Environmental Affairs, Indiana

“There is not only the problem that efficient projects are often slow to get to the point where they generate
actual expenditures, but also that once the government starts spending it is hard to turn off the tap when
the stimulus is no longer needed.”
‐ Thomas Mayer
Professor Emeritus, University of California –Davis

“The stimulus plans assume consumption is the source of economic growth. It is not. It is the
consequence of said growth. The ‘stimulus’ is a redistribution of spending, at best, and will do little to help.
The next Administration should avoid large scale programs and experimentation and allow the marketplace
to correct the errors made by the last 8 years of misguided intervention.”
‐ Steven Horwitz
Charles A. Dana Professor of Economics, St. Lawrence University

“Any so-called stimulus program is a ruse. The government can increase its spending only by reducing
private spending equivalently. Whether government finances its added spending by increasing taxes, by
borrowing, or by inflating the currency, the added spending will be offset by reduced private spending.
Furthermore, private spending is generally more efficient than the government spending that would replace
it because people act more carefully when they spend their own money than when they spend other
people's money.”
‐ Richard Wagner
Professor of Economics, George Mason University

“Want to grow the economy without inflation? Cut marginal tax rates, slash the corporate rate, expense
investment in the first year (instead of depreciation), keep tax rates low on dividends and capital gains, and
repeal the death tax. Have the Federal Reserve focus on price stability and a sound dollar, and on not
generating a monetary roller coaster. (That, in part, is what caused the housing and commodities bubbles.)
Rein in government spending to pay for the tax cuts, and trim senseless regulation.”
‐ Stephen Entin
President & Executive Director, Institute for Research on the Economics of Taxation

“Rather than old style Keynesianism we should reduce the corporate income tax substantially. The
problem is not lack of demand, but rather a lack of investment. By reducing the corporate income tax,
among the highest in the industrialized world, we will increase the incentive for companies to invest in new
equipment, technology, research and development, and buildings. This will increase productivity in the
long run, leading to higher GDP and higher wages.”
‐ Gary Wolfram
William Simon Professor of Economics, Hillsdale College

“Government ‘infrastructure spending stimulus’ programs in Japan during the 1990s produced no stimulus,
but rather a vast overhang of government debt. Bridges, tunnels, roads, and trains to nowhere stimulate
nothing. It is productivity growth that counts, and that comes mainly from the private sector – which is why
tax cuts have always been a surer way to economic recovery.”
‐ Lawrence Franko
Retired Professor, University of Massachusetts Boston, College of Management

“There is no convincing evidence that stimulative fiscal policy is either feasible or effective. The recognition
and action lags (ancient terms from the bygone Keynesian era) alone virtually always mean that the
stimulus arrives after the recession is over, thus causing an undesirable distortion that impedes recovery.”
‐ John Seater
Professor of Economics, North Carolina State University

“The evidence that fiscal stimulus works is weak. Why risk such large amounts on a program with
uncertain benefits, especially if the mechanisms to transmit those benefits to the economy are a bunch of
pork barrel, second rate projects.”
‐ Charles Reback
Assistant Professor, University of South Carolina Upstate

“Japan in the early and mid 1990s engaged in major fiscal stimulus focused on infrastructure projects with
deficits equal to 7-8% of GDP and a cumulative Debt/GDP of almost 150%. None of this led to economic
recovery until the late 1990s when the Bank of Japan engaged in quantitative easing of monetary policy
and the Government of Japan finally introduced a taxpayer bailout of the banks. The Fed and Treasury in
the US have already taken such actions. The Japanese experience suggests that additional fiscal stimulus
will only add to the Debt without helping the economy.”
‐ Michael Keran
Retired, Former Sr. VP & Director of Research, Federal Reserve Bank of San Francisco

“Government intervention and ‘stimulus’ in the housing market is largely responsible for the current
economic crisis. History has shown that the Obama team’s proposed ‘stimulus’ is not only going to have
little to no effect in the short run, but will create a larger bureaucratic structure, lead to tremendous
investments in unproductive political lobbying among ‘stimulus project’ wannabes, and dissuade/delay
private investment, recovery and growth.”
‐ Michael Sykuta
Associate Professor, University of Missouri – Columbia

“Common sense dictates that any investment, public or private, must take opportunity costs into
consideration. It’s never a good idea to waste scare resources, but this is often what occurs when
economics gets pushed aside in favor of politics.”
‐ James Garven
Frank S. Groner Memorial Chair of Finance, Baylor University

“Our economy as a whole will [no] benefit from taking money from current or future taxpayers to support a
government spending spree. No doubt, certain interest groups will gain from feeding at the public sector
trough. But losers surely will outnumber winners by a large margin. Our economy as a whole will benefit
from Congress lowering taxes and letting Americans decide for themselves what is worth spending their
hard-earned dollars on.”
‐ David Laband
Professor of Economics and Policy, Auburn University

“A government-spending ‘stimulus’ is a very bad idea. Because government can spend only what it has
taxed or borrowed away from the public, it creates no new demand but merely redirects it. Recovery
depends on profit and loss discipline and public confidence that the basic rules underlying free markets will
be followed. The latter is hurt by government interventions such as ‘stimulus.’”
‐ Howard Baetjer
Lecturer, Dept. of Economics, Towson University

“[T]ax cuts will not create the waste [than] government spending would, because individual households are
making their own decisions about which spending or investment projects are worthwhile for themselves.”
‐ Alan Stockman
Wilson Professor of Economics, University of Rochester

“During recessions, unemployment rationalizes a role for government in creating jobs. But there is no
reason these jobs should be directly working for the government: nothing about a recession justifies larger
government. If we are worried about too few jobs, it makes sense to subsidize private employment (for
example, by temporarily lowering payroll taxes or creating a new tax subsidy for new hires).”
‐ Glen Weyl
Junior Fellow at the Society of Fellows and Post-Doctoral Fellow in the Department of
Economics, Harvard University

“Tax cuts are preferable to spending, especially the many programs that will doubtless result from this
process. Even the designated chair of Obama's CEA finds that increased taxes reduce growth.”
‐ James Butkiewicz
Professor of Economics, University of Delaware

“The current recession was caused by government fiddling with the mortgage market and the moral hazard
created by the illusion of government monitoring of financial markets. Increased government involvement
in the economy is not the solution.”
‐ Henry Thompson
Professor, Auburn University

“An ‘economic stimulus’ program will do nothing to correct the serious price and resource misallocations
that currently exist and are stopping the economy from moving back toward ‘full-employment.’ In fact, they
will likely retard the recovery. They will divert resources from the private sector to the government sector
moving us further away from a free-enterprise economy.”
‐ Gene Smiley
Emeritus Professor of Economics, Marquette University

“There is ample evidence that large deficit spending packages will be counter-productive. We should focus
on tax cuts and on spending proposals where the benefits outweigh the costs. Transferring funds to state
governments avoids asking the cost-benefit question and should be avoided.”
‐ King Banaian
Professor, Dept. of Economics, St. Cloud State University

“Government spending is not the road to real economic prosperity. I am particularly concerned about
government spending misdirecting opportunities for entrepreneurship and private economic growth.”
‐ Henry Butler
Executive Director, Searle Center on Law, Regulation, and Economic Growth
Northwestern University School of Law

“Governments make lots of a bad policy during times of economic stress. A spending package that
approaches $1 trillion is a case in point. Do we really trust the Congress and the Executive Branch to
spend such vast sums wisely, especially after all the bumbling around and ill-advised bailouts this year?
Does the government really have a long list of well-thought-out, cost-effective projects that will help our
economy? I do not think so.”
‐ Scott Bradford
Associate Professor, Brigham Young University

“A spending stimulus will only delay the needed restructuring of the U.S. economy to remain internationally
competitive. Tax cuts will facilitate that restructuring far better than spending and job creation by the
‐ Stacie Beck
Professor, University of Delaware

“There is no credible evidence that government spending can create jobs in the long run. Government
policies can, however, destroy jobs.”
‐ John Howe
Professor of Finance, University of Missouri

“Japan’s federal expenditures, following their 1989 stock market crash, have had little to no effect on their
recovery. Japan has been left with a huge government debt per GDP ratio and nearly 20 years of little to
no growth. Why on earth would the U.S. want to follow in Japan’s footsteps?”
‐ Gary Quinlivan
Dean of the Alex G. McKenna School, St. Vincent College

“We must first recognize that government officials must be seen as doing something to fix the economy;
however, the plans I have been hearing about, namely developing infrastructure for heretofore impractical
‘green’ technologies, strikes me as an odd approach. Markets still work pretty well and most economists
will tell you that government interference with those markets typically causes more harm than good…
Entrepreneurs will create a much more efficient outcome if the costs imposed upon them by government
are reduced.”
‐ Brian O’Roark
Associate Professor of Economics, Robert Morris University

“Government spending programs like these are political grab-bags whose successes are predicated on
satisfying political interest groups, not on creating value and growth in a market economy; these
government spending programs then often become embedded ‘entitlements,’ crowding out the flow of
funds to private investments in a free marketplace.”
‐ Douglas Houston
Professor, School of Business, University of Kansas


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