Please contact your Senators and let him or her know what you think of the “Stimulus” package which is scheduled to come to the Senate floor this Wednesday, February 4th, 2009.
The $819 billion-dollar bill passed the House of Representatives last week with a vote of 244 to 188. Read what the Wall Street Journal has to say on a few of the specifics. Or a recent article on how Japan’s “stimulus” failed. Other interesting articles can be found here, here, here, and here.
Here is my letter:
RE: American Recovery and Reinvestment Bill of 2009
I realize this bill was broadly supported by Democrats in the House. This bill is not broadly supported by either Democrats or Republicans in the nation. Please vote no on this “stimulus” package.
Since the summer, economists with a Keynesian perspective have gained the public ear, but other prominent economists have been expressing their doubts and objections, even several Keynesians. Empirical evidence exists which reveals that government stimuli and do not work. (See references below.)
In spite of President Obama’s pledge that this bill would not contain “earmarks,” it is full of funding for special interest groups and politically motivated projects. What our economy needs now is not more spending, taxes and debt, but an opportunity to build back the savings and capital that were depleted, to shift workers into industries which are in greater actual demand by consumers (instead of jobs which are politically mandated by special interest groups) and to let those business fail which have not made profitable use of scarce resources.
Throughout history, and across the nations of today, the evidence is clear: the greater the economic and political freedom, the better off are people in every economic strata.
I urge you to think carefully before committing us to such a huge amount of wasteful spending, and to courageously speak and act against burdening us with an even larger amount of public debt or taxes.
From economics professor Tyler Cowen:
“My point is simple: it is very hard to find examples of successful fiscal stimulus driving an economic recovery. Ever. ”
From a research paper by Olivier Blanchard and Roberto Perotti, “An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and taxes on Output”:
“We find that both increases in taxes and increases in government spending have a strong negative effect on private investment spending. This effect is consistent with a neoclassical model with distortionary taxes, but more difficult to reconcile with Keynesian theory: while agnostic about the sign, Keynesian theory predicts opposite effects of tax and spending increases on private investment. This does not appear to be the case.”
Bartlett, Bruce “How not to stimulate the economy” Public Interest; summer 1993; 112; ABI/INFORM Global
Shows that government stimulus packages have been uniformly passed in the U.S. after the recession had already ended.
Mountford and Uhlig, “What are the Effects of Fiscal Policy shocks?”
Tax cuts stimulate and government spending retard economic recovery.
Greg Mankiw on “Spending and Tax Multipliers”
Summarizes some key research which shows the ineffectiveness of government spending as an economic stimulus.