Ben Stein: Obama’s Questionable Stimulus Plan

Posted by Kendall Harmon

But I am a bit worried that...[Obama's] knowledge of economics may not be as extensive as his legal background. In particular, he’s been campaigning with an idea of a second round of economic stimulus to combat the evident slowdown in the economy, to follow President Bush’s first round that is now wrapping up. The first round hasn’t succeeded, and Senator Obama’s ideas aren’t very promising, either.

In that first round, the government has basically borrowed $80 billion to $100 billion and used it to send out checks to most American taxpayers. The hope was that the extra money in taxpayers’ pockets would stimulate consumption.

As Martin Feldstein, the Harvard economist, has said recently, that hope was largely misplaced. The overwhelming bulk of the money borrowed and distributed went to pay down debts and into saving. Only 10 to 20 percent of the money the Treasury borrowed went to bolster consumer spending, Professor Feldstein said.

Of course, the final word on this stimulus package isn’t in. Some economists say that the package has helped avoid deeper short-term problems, and Treasury Secretary Henry M. Paulson Jr. says we need more time to assess the true impact of the rebate checks. (And the stronger-than-expected G.D.P. numbers for the second quarter may be attributed mostly to the export boom from the weak dollar, which turns out to be powerful medicine indeed.)

The rebate matter, however, leads us to a major issue: Do we really want to increase federal indebtedness to stimulate consumption, anyway?

Read it all.

Filed under: * Economics, PoliticsEconomyUS Presidential Election 2008

Posted August 31, 2008 at 8:42 pm [Printer Friendly] [Print w/ comments]

1. DonGander wrote:

So…, it’s NOT good for me to spend, spend, spend on MY credit card but it IS good for me to spend on government’s credit card…?

I can’t afford health insurance but I have paid about $80,000 of taxes in the last 10 years.

I am convinced that we elect the wrong people to serve in government.


August 31, 10:21 pm | [comment link]
2. Ken Peck wrote:

O.K., I’ve felt since the Kennedy years that consumption for the sake of consumption wasn’t a good idea. But what I was taught in Economics 301 was that government should have budget surpluses in good times—and preferably “money in the bank”—and budget deficits in lean times—drawing on previous surpluses. Or, at the very least to pay down the debt in good times. But what we have had since 2001 is nothing but huge national deficits in both lean and fat years, with the total doubling in those years. That is part of the problem.

When it comes to “pork barrel” spending, not all government spending on domestic problems is “pork barrel.” There is such a thing as government investing in the nation. It was done from the very beginning of the Republic—whether it be building the Erie Canal, the land grants for public education or the huge subsidies to the railroads to mention just three examples.

Our infrastructure is crumbling. That is vitally necessary both to commerce and to the national defense (as Dwight David Eisenhower, the father if the Interstate Highway System, recognized).

If we are really to become energy independent at any time in the future we will need to develop alternative sources of energy besides oil, gas and dirty coal (all of which were aided by favorable government tax policies). Those alternative sources of energy would benefit from favorable governmental tax policies (which McCain opposes, by the way).

Similarly we need to reduce actual energy demand if we are to become energy independent. That means improvement in our intra-urban and regional inter-urban mass transit. Again, that will require government spending at the federal, state and local levels.

And all such government spending, besides being an investment in the economic future of the nation, will also create jobs and stimulate the economy.

Pretty much the same goes for investments in public education at all levels as well as the health of our citizens.

September 1, 11:17 am | [comment link]
3. Ken Peck wrote:

If you had checked out the polls comments to the 31st, you would have read:

Given that the immediate reaction by national voters to Palin was very similar to their first reaction to Biden—mildly positive but also with a high degree of uncertainty about each—it may not be surprising if the publicity surrounding her announcement also does not produce an immediate bounce in support for McCain.

August 31, 2008

September 1, 1:22 pm | [comment link]
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