Friday, January 18, 2008

"Keynesian Kool-Aid" -- Catchy Phrase for the Stimulus Package

Listen to this Cato podcast featuring Chris Edwards to get the proper perspective on the forthcoming "Stimulus Package" that President Bush, Treasury Secretary Paulson, Fed Chairman Bernanke, and Congress all seem in a hurry to put in place. It's a race to see who will get the Most Caring Politician prize.

[Thanks to for the image.]

Edwards says this about government stimulus to the economy:

"I think that Mr. Bernanke has been drinking the same sort of Keynesian Kool-Aid that other prominent economists like Larry Summers have been drinking. I don't believe it works. I think it simply pushes debt onto future generations of Americans, so I actually think there is a moral question here. A stimulus package simply is the federal government borrowing more money, giving it to people now, just sort of randomly and then putting the tab on taxpayers and our children in the future. It seems to be very immoral for the federal government to go ahead and do this when frankly they have no idea what they are doing with the economy.

"Economists have a horrible track record on forecasting what the economy is going to do, even a few months ahead of time. This sort of stimulus package is just a shot in the dark, it's a big waste of money and it just increases the nation's debt."

Daniel Mitchell of Cato concurs, saying:

"Rebates are particularly disappointing because they resuscitate the discredited Keynesian notion that an economy benefits when the government borrows money from people in one sector of the economy and distributes it to people in another sector of the economy. Economic growth occurs when there is an increase in national income, not a redistribution of national income."

Finally, a little common sense. But that never stopped a politician, nor for that matter a Federal Reserve Board.

The same comments above could be applied to the Fed technique of issuing credit to the monetary system. It's really just robbing Future Peter to pay Present Paul. At some point, the credit tab must be paid.

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