The folks at U.S. News & World Report have posted an online debate on the never-ending topic: “Does Stimulus Spending Work?“
You know my thoughts on the topic, including my thumbs-down to Obama’s latest stimulus scheme, so it won’t surprise you to know that I think Veronique de Rugy of the Mercatus Center beat her three left-wing opponents (there was also a participant who served in the Bush Administration, but I don’t view his section as credible since he basically argued that stimulus spending is okay when GOPers are the ones wasting money).
Here’s some of what Veronique wrote.
…let’s look at the latest attempt to use government spending to jump start the economy: the American Recovery and Reinvestment Act. Three years after Congress passed that law, unemployment lingers over 9 percent, far above the promised 7.25 percent, and the economy remains weak. Clearly, the stimulus didn’t work as advertised. …The data show that stimulus money wasn’t targeted to those areas with the highest rate of unemployment. In fact, a majority of the spending was used to poach workers from existing jobs in firms where they might not be replaced. Finally, a review of historical stimulus efforts shows that temporary stimulus spending tends to linger. Two years after the initial stimulus, 95 percent of the new spending becomes permanent. …Research from Harvard Business School shows that federal spending in states causes local businesses to cut back rather than to grow. In other words, more government spending causes the private sector to shrink, the exact opposite of the intended result.
If anything, Veronique is too kind in her analysis. I would have pointed out that Keynesian stimulus didn’t work for Hoover and Roosevelt in the 1930s, Japan in the 1990s, or Bush in 2001 or 2008.
But how often do you find someone from France arguing for smaller government?
