Monday, March 23, 2009

What if the government stimulus is the wrong thing to do?

I am far from being an expert on economics, which makes it hard for me to articulate a reasonable objection to the enormous stimulus spending of late. But I've been decidedly and increasingly uneasy about it since the start, for a few reasons.

One problem I have is the vague notion that congress, the so-called "brains" behind the operation, have little to no expertise in the field of economics themselves. Their arguments in favor of the massive spending plans seem flimsy and wrongly motivated. They say, "we can't just do nothing," and they have the support of the panicked public, who want them to do something. However, I would much rather that congress acknowledge that they are, perhaps, impotent in the face of an ebbing economy than have them spend trillions of dollars in the pretense of "doing something".

Despite the fact that this latest market bubble, which has so dramatically burst, was inflated by wreckless behavior by arguably under-regulated banks and foolish trading on Wall Street, it doesn't seem clear to me that an equally artificial recovery is warranted. Traditionally, the market has had its ups and downs and after a trough, we inevitably start up again. Throwing money at the problem feels like trying to dig out of a hole to me.

The truth is that there are "experts", plenty of them, that don't think we can spend our way out this recession. There are experts who think removing money from the private sector and giving it to the government to spend instead will only reduce the efficiency of how the money is spent without fixing anything. We've already seen examples of the money being spent in ways we don't like and not having the effect we'd hoped for. There are experts who believe that as bad as this recession may be, it is a natural fluxuation in the market which will resolve itself once it hits bottom. By spending trillions of dollars now, aren't we just delaying or prolonging the inevitable bottoming out of the market and buying ourselves future trouble?

My instint is, if you're not sure what will work, what the solution is, isn't it better to error on the side of not spending trillions of dollars? In what other possible situation would we think it was a good idea to just throw more money than had ever been conceived of at a problem with no guarantee of success?

There is a wonderful article on, by John Stossel and Andrew Kirell, "Is the Government Bailout Just Dollars and Nonsense?" which argues much more intelligently than I could ever hope to on this point.

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