This Is Stimulating

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Posted on : 2/18/2010 12:30:00 PM | By : Dann | In : , , ,

Megan McArdle has a brief piece on administration claims regarding the efficacy of last year's stimulus bill that is worth a read.  Her take on the question of whether or not the stimulus helped?  Sure.  Some.

But nearly as much as the administration is claiming.

I was never a big fan of the stimulus bill for a couple of reasons.  The first reason is that the Congressional Budget Office was predicting a recovery in the second half of 2009 without spending a dime of stimulus money.

The second reason is that it seemed that someone had calculated a dollar value to be spent to cause a certain amount of recovery.  After that, the administration and Congress were hell bent to spend that amount of money regardless of what it was actually purchasing.  Some of the things the stimulus purchased....like the spiffy new main road that I use to get to and from my neighborhood....created jobs and resulted in something of value.  Some of the other things the stimulus purchased.....not so much.  They should have spent more time focusing on what was being bought and less time worrying about how much was being spent.  If there were only $300billion in worthwhile projects, then that is all they should have spent.

The third reason for my skepticism over the stimulus is that I don't think a real economic recovery was ever going to be caused by government spending.  I have the good fortune to speak with business owners and managers during the regular course of my employment.  These people almost uniformly say that there is business out there to be done.  They need to hire more people.  They need new equipment.  There is money to be made and they want to make it.

What is keeping them from doing so?

A Congress and an administration that demonizes corporations and denigrates profit.  A Congress and an administration that continue to promote increasing income taxes for those same business owners and managers.  A Congress and an administration that continues to push for health care reforms that these same business owners cannot afford.  A Congress and an administration that continues deficit spending at rates unseen in 70 years.

These business owners and managers know that such spending isn't sustainable.  If it isn't checked soon, then interest rates are going to climb.  Inflation will return.  And as a result, they will lose whatever they have invested to expand their operations.

The government has spent $287 billion of the $787 billion in stimulus money.  The modest good that it has done is well and good.

But if the administration wants to truly set the country back on the course of economic progress and prosperity, then they would be well advised to cancel the unspent funds, forswear tax increases, and get serious about cutting the federal budget until it is balanced.

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