Monday, February 02, 2009

Finally, Some Clear Thinking

Everywhere you turn you read or hear about the stimulus package being pushed on capital hill. The bill in its current state is 1/3 stimulus and 2/3 pork or pet projects. This $1 trillion slush fund of goodies needs to be looked at by serious people who have America as their number one interest.
Florida Sen. Mel Martinez seems to be this guy. He found a few other fellow GOP members to join him. His plan cuts the bill back to $713 billion and distributes out like this; $430 billion in tax cuts, $114 billion for infrastructure projects, $138 billion for extending unemployment insurance, food stamps and other provisions to help those in need and $31 billion to address the housing crisis.
Now this is a bill we need to get behind. Call/write your senators and tell them to join Mel in getting this bill passed in the senate. We don't need honey bee insurance and STD programs. We don't need new sod in the capital mall. We don't need to give tax breaks to Hollywood. We don't need to buy top of the line furniture for DHS.
Let's get some input form economists:
Michael Cannon, Cato 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."
Antony Davies, Associate Professor of Economics, Duquesne University: "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 interests."
Joseph Zoric , Associate Professor of Economics, Franciscan University of Steubenville: "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."
Edward Lopez, Associate Professor of Law and Economics, San Jose State University: "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."
Justin Ross, Assistant Professor of Economics, School of Public and Environmental Affairs, Indiana University: "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."
Richard Wagner, Professor of Economics, George Mason 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."
Stephen Entin, President & Executive Director, Institute for Research on the Economics of Taxation: "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."
Gary Wolfram, William Simon Professor of Economics, Hillsdale College: "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.”
Lawrence Franko, Retired Professor, University of Massachusetts Boston, College of Management: "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.
Michael Sykuta, Associate Professor, University of Missouri – Columbia: "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."
David Laband, Professor of Economics and Policy, Auburn 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."
Howard Baetjer, Lecturer, Dept. of Economics, Towson 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.’"
Henry Thompson, Professor, Auburn University: "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."
Gene Smiley, Emeritus Professor of Economics, Marquette 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.
Stacie Beck, Professor, University of Delaware: "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 government."

It seems pretty clear how to stimulate the economy. Now all we need is some leaders to step forward and do it. Looks like Florida Sen. Mel Martinez has a plan that would make sense.

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