Tuesday, February 10, 2009

Best Explanation I've Seen As to Why the Stimulus Can't Work

Walter E. Williams: The stimulus plan fails the swimming pool test

  • "Any so-called stimulus program is a ruse. The government can increase its spending only by reducing private spending equivalently. Whether government finances its added spending by increasing taxes, by borrowing or by inflating the currency, the added spending will be offset by reduced private spending. Furthermore, private spending is generally more efficient than the government spending that would replace it because people act more carefully when they spend their own money than when they spend other people's money." --Richard Wagner

    A short translation of Wagner's comment is: There is no Santa Claus or Tooth Fairy.

  • In stimulus package language, if Congress taxes to hand out money, one person is stimulated at the expense of another, who pays the tax and is unstimulated. A visual representation of the stimulus package is: Imagine you see a person at work taking buckets of water from the deep end of a swimming pool and dumping them into the shallow end in an attempt to make it deeper. You would deem him stupid. That scenario is equivalent to what Congress and the new President proposes for the economy.

Read this whole commentary for deeper understanding.

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