Wednesday, March 18, 2009

Stimulus Analysis

Given the size, will the stimulus work as advertised? Will the goods and services—be they concrete for new highway projects or groceries for hungry families—pump up flagging demand and boost stalled economic activity?

If so, it will be the first time in modern recorded history...

The biggest problem is that the government can’t inject money into the economy without first taking money out of the economy. Where does the government get that money? It can a) borrow it or b) collect it from taxes. There is no aggregate increase in demand. Government borrowing and spending doesn’t boost national income or standard of living; it merely redistributes it. The pie is sliced differently, but it’s not any bigger.

read the entire essay

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