Sanity Injection

Injecting a dose of sanity into your day’s news and current events.

Stimulus, Part II: The Case for Doing Nothing

Posted by sanityinjection on January 28, 2009 explores the minority view among a number of economists and libertarians that the best thing to do to help the economy is neither massive government spending or tax breaks, but simply to do nothing. The argument is that while the recession will be painful, it will force needed corrections in the economy that will lay the groundwork for a recovery. In other words, the danger of a stimulus package isn’t just that it might not work, but that it might work, resulting in a recession that is less deep and less painful but lasts longer.

As the article itself acknowledges, this approach isn’t likely to be politically feasible. Politicians have to look like they’re doing something. Also, it’s undeniable that in a recession the poor bear the brunt of the suffering even though they have contributed little to the problem. (Some low-income families may have overextended themselves with loans and buying on credit, but many have not, and could still lose their jobs.) Doing nothing means failing to address that inequity.

Nevertheless, it’s important to understand the argument being made here. The “Do-Nothing” crowd should not be dismissed as irrational government-haters.


6 Responses to “Stimulus, Part II: The Case for Doing Nothing”

  1. sanityinjection said

    Looks like the GOP Senators are also taking a firm line on the stimulus bill:

    As well they should. It seems clear that the Republicans are open to compromise. The question is whether the Democrats would prefer to ram through their bill on a party line vote. If they do, they will be risking a lot on the success of the stimulus package, because they will own it.

  2. sanityinjection said

    The Washington Times reports that the Congressional Budget Office has analyzed the House and Senate versions of the stimulus bill and concluded that both would actually harm the economny in the long run:

    The CBO said that the stimulus would boost economic growth and create jobs in 2009 and 2010 but would actually reduce the GDP over the following eight years because of borrowing costs.

    This will come as no surprise to economists, who have been saying all along that we are mortgaging the future. I wonder if Democrats have considered what the impact will be of boosting spending now for all their favorite programs, only to be unable to sustain that spending within a few years’ time?

  3. sanityinjection said

    Peggy Noonan has perhaps the best quote I’ve seen on the stimulus bill:

    “I continue to find no one, Democrat or Republican, who has faith that the stimulus bill passed by the House will solve anything or make anything better, though many argue that doing absolutely nothing will surely make things worse by not promising at least the possibility of improvement through action.”

    That pretty much sums it up. Noonan’s full column is here:

  4. Tubby said

    I find all this theorization a bit exhausting. Bottom line is, if we can *create jobs* with *specific projects*, isn’t that a good thing? Sure, it’s somewhat of a band-aid, so libertarians, I get it. But Obama did not mince words tonight: right now is not the time to play politics with the economy. Now whether or not he’s playing politics by merely saying that to give us that Uncle-Sam-stands-behind-you warm, fuzzy feeling, I can’t say. Perhaps I’m just too used to politicians raising their fists and giving rally cries when things are bad. Even if there’s a degree of that though, don’t you think the specific calls to action in this bill can do some real, tangible good? I suppose only time will tell.

  5. sanityinjection said

    A new TV commercial funded by the conservative American Issues Project puts the stimulus in perspective:

    “Suppose you spent $1 million every single day starting from the day Jesus was born — and kept spending through today. A million dollars a day for more than 2,000 years. You would still have spent less money than Congress just did.”

  6. tubby said

    They forgot to adjust for inflation. 😉

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