The burden of proof
03 Feb 2009 07:29 am
If you pray hard enough, water will run uphill. How hard? Hard enough to make water run uphill. ~ Robert Heinlein
There are a lot of people in my comments saying, apparently in all earnesty, "I really think the burden of proof is on the wackos who don't want the stimulus."
I am frankly flabbergasted. The proponents of the stimulus are proposing to spend nearly a trillion dollars. That's about $3,000 for every man, woman, and child in the United States. Do you have $3,000 lying around that could just be spent on any old thing without you really caring? You may call me crazy, but in the McArdle household, we view $3,000 as quite a tidy sum, the kind of money we want to make sure is wisely spent.
At least with the tax cuts, there's little risk that the money will, from the taxpayer's standpoint, be wasted. It may not create much in the way of stimulus, but it's essentially a neutral act--give them money now, take it later. Cash transfers, too, offer relatively few of those frictions; there's some deadweight loss, but whatever those on unemployment or welfare buy, they presumably valued more highly than alternative uses for the money. Government spending, on the other hand, comes with no guarantee that whatever it buys will be worth as much to the polity as the alternative uses for the money. Hell, badly done government projects can actively destroy value--go up to Buffalo and look at the empty, useless subway that killed Main Street, for example.
Given that, it seems to me that the burden of proof ought naturally to be on the stimulus proponents to satisfy the public that their highly theoretical models are basically sound, especially for the parts of the bill that aren't tax cuts or transfer payments. Let's recall that the evidence for this kind of stimulus working in this kind of situation basically rests on a single instance (World War II)--the other two times it was tried (Japan in the 1990s and America in the 1930s) the economy basically rolled along in the doldrums for the rest of the decade.
Proponents say that that's because there wasn't enough stimulus, which is possibly true, but not really satisfying, because first, how do we know this package is enough, and second, that leaves us with a belief in the virtues of stimulus that is essentially non-falsifiable. We might as well move macroeconomic policy to the Office of Faith-Based Initiatives.
meganmcardle.theatlantic.com
Again, this brings us back to the notion, taken seriously by the Obama admin, that there is a 1.5 positive multiplier for government spending.
Now, the idea such a multiplier can be extended ad inifinitum is obviously silly, so it must only be true for some range of spending. It's also true one could find a very large multiplier at low levels of government spending (going from, say, no federal government to a small one) because of the benefit of externals like national defense, regulation of interstate commerce, and a coherent foreign policy. So one could presumably draw a curve where the multiplier starts out large at low levels of gov't spending and progressively shrinks as government gets larger.
As hard as it is to believe, the stimulus argument is apparently that the spendthrift Bush years did not expand government quickly enough, so we are still on a portion of the curve where the multiplier is still greater than 1.
Posted by TallDave | February 3, 2009 8:25 AM
meganmcardle.theatlantic.com |
