When the facts change, I change my mind. What do you do? -- John Maynard Keynes

Saturday, November 19, 2011

Yes Fiscal Policy Matters, but What Kind of Stimulus?

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"The one thing that has disillusioned me is the discussion of fiscal policy. Policymakers and far too many economists seem to be arguing from ideology rather than evidence. As I have described this evening, the evidence is stronger than it has ever been that fiscal policy matters—that fiscal stimulus helps the economy add jobs, and that reducing the budget deficit lowers growth at least in the near term. And yet, this evidence does not seem to be getting through to the legislative process."--Christina D. Romer, November 7, 2011

Fiscal stimulus, yes, but of what kind?  Federal spending that is wasteful and encourages an increasing dependency on the federal government by state and local governments, as well as individuals? Tax cuts at a time when the continuing federal deficits are threatening the long-term future of the nation? Federal spending whose objective is to create more public union jobs (federal, state, or local) when we can't afford the public union jobs we already have?

The hard truth is the only stimulus we can afford is investment in infrastructure.*  This is federal spending with a real return--in terms of economic returns, increase in employment (mostly private employment--both union and non-union jobs), can be prioritized and allocated, and doesn't lead to long-term dependency on the "federal dole."

*Warren Buffett: “in terms of stimulus, infrastructure is a very, very logical place to spend real money. I mean, if you decide you're going to run a government deficit and large one and to act as a stimulus and you've got the kind of needs we have in this country in terms of all kinds of infrastructure...” (CNBC interview, Nov. 14, 2011)

Washington, are you listening?


The Big Picture

Financial Crisis - The Telegraph

JohnTheCrowd.com | The Sailing Website

Craig Newmark - craigconnects