Excellent Op-Ed at the WSJ today by Amara Bhide. Here are the key paragraphs:
Don't Believe the Stimulus Scaremongers
Americans are losing faith in the fairness and wisdom of economic policy.
By AMAR BHIDé
The economic theory behind the nearly $800 billion stimulus package may be cloaked in precise mathematics but is ultimately based on John Maynard Keynes's speculative conjecture about human nature. Keynes claimed that people cope with uncertainty by assuming the future will be like the present. This predisposition exacerbates economic downturns and should be countered by a sharp fiscal stimulus that reignites the "animal spirits" of consumers and investors.
But history suggests that dark moods do change on their own. The depressions and panics of the 19th century ended without any fiscal stimulus to speak of, as did the gloom that followed the stock-market crash of 1987. Countercyclical fiscal policy may or may not have shortened other recessions; there are too few data points and too much difference in other conditions to really know.
Unfounded assertions that calamitous consequences make opposition to the rapid enactment of a large stimulus package "inexcusable and irresponsible" are likely to offset any placebo effect the package might have. Shouting "fire" in a crowded theater, as our last Treasury secretary did to peddle the Troubled Asset Relief Program (TARP), didn't restore financial confidence. Similarly, a president elected on a platform of hope isn't likely to spark shopping sprees by painting a bleak picture of our prospects.
This is exactly right. Not only is the porkulus bill ineffective because of the targets of its spending (substantial amounts either budgeted for $0 ROI projects), but also because of the way in which it was sold.
This was not sold as FDR sold the New Deal - We have nothing to fear, but fear itself. This was sold through the tactics of fear. So, the population sees massive government spending (whose own proponents admit will be ineffective) combined with dark scenarios that would scare the bejeesus out of any sane person.
Combine this with the understandable perception that our government - local, state, and federal - has completely lost its way in terms of restraint (both fiscal, political, and personal) and the people's confidence in government's ability to solve this problem is eliminated.
Understandably, people rationally contract their spending.
If you don't agree, ask yourself this question:
What number of people are going to have a more positive perception of our economic future because Barry inks the stimulus bill today?
If you answer any number greater than zero, you are a fool.
ARC: St Wendeler