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Politics : Just the Facts, Ma'am: A Compendium of Liberal Fiction -- Ignore unavailable to you. Want to Upgrade?

To: Sully- who wrote (76467)	1/7/2010 11:56:29 AM
From: Sully-	1 Recommendation Respond to of 90947

More Proof that Spending Doesn't Stimulate the Economy By: NRO Staff The Corner Spending stimulus bills predictably fail for a simple reason: Congress cannot inject money into the economy until it has first borrowed that money out of the economy. No one argues that raising a pool’s water level can be done by removing water from one side and pouring it in the other side. Yet many serious people believe government can expand the economy simply by borrowing dollars out of one part of the economy, and transferring them to another part. While the Heritage Foundation and others have been criticizing the stimulus myth for a while, critics keep coming back: What about dollars transferred from savers to spenders? What about dollars borrowed from China? What about the multiplier effect of government spending? What about replenishing falling consumption spending? Well, my new paper “Why Government Spending Does Not Stimulate Economic Growth: Answering the Critics” addresses each of these (and other) fallacies used to defend government spending as stimulus. Or, one can use simple math. Economist Mark Zandi sold many lawmakers on stimulus spending with his estimate that each dollar of additional deficit spending increases the GDP by approximately $1.50. But if that were true, then last year’s $1 trillion increase in the budget deficit would have created an enormous $1.5 trillion in new wealth (in a $14 trillion economy, this would have not only ended the recession, it would have caused massive overheating). Instead, the economy shrank by about $300 billion. Unless stimulus advocates assert that the economy would have shrank by $1.8 trillion (a historic 13 percent contraction) without this new deficit spending -- an argument no credible economist has dared to make -- then these Keynesian economic models have proven spectacularly wrong. -- Brian Riedl is Grover M. Hermann fellow in federal budgetary affairs at the Heritage Foundation. corner.nationalreview.com