Friday, November 14, 2008

Govt Stimuli Explained

Brian Riedl writing in the Wall Street Journal explains all you need to know about how government stimulus packages work. His central point is:
Government stimulus bills are based on the idea that feeding new money into the economy will increase demand, and thus production. But where does government get this money? Congress doesn't have its own stash. Every dollar it injects into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It's merely redistributed from one group of people to another.
I strongly urge everyone to read the entire article, which uses "infrastructure spending" as an example.

In fact, the article makes so much sense — without requiring any specialized knowledge of economics — I can't understand how anyone could think otherwise. But, then, given that we're talking about the Federal government and its fan clubs who want to use it as a club, I think I just answered my own puzzlement...

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