I’m not as sanguineas this Forbes columnist that ur economy is beginning to reboundbut my liberal friends are, and if it is, then this guy’s right: we’ve only spent $37 billion of the Stimulus funds so far, much too little to have had an effect, so we didn’t need it and when it does show up in the pipeline it will do nothing but push up inflation and increase our debt, just as many economists and commentators said.
Given the rapid improvement in the economic outlook, and the slow rate of stimulus spending under the act thus far, most of the spending under ARRA will likely occur well after recovery is under way. A new CBO studyshows that through late May only about $37 billion has been spent, which is just under 10% of authorized spending under the ARRA. In fact, the Departments of Education, Transportation and Energy all have spent 2% or less of their allocations. Recovery is on the way, without massive government spending.
But wasn’t the whole idea for fiscal stimulus that there was no way we would recover without it? And didn’t Vice President Biden indicate that virtually all economists agreed with this view? Given the improving economic outlook, ARRA now represents a significant and very expensive public policy mistake. And in contrast to the vice president’s view about economists’ support for the program, it is well known that many of them who specialize in macroeconomic policy significantly criticized the need for substantial fiscal stimulus before ARRA was passed.
The economic arguments for ARRA were badly dated and erroneous. The stimulus bill was promoted under the old-fashioned Keynesian view that only the federal government is big enough to dig us out of the hole that we had gotten ourselves into, and digging us out of that hole required massive federal spending. But there was significant opposition to this premise by many economists who not only predicted that spending would be significantly delayed–with the bulk of spending not taking place until after recovery was well under way–but who also sharply disagreed with the premise that enormous increases in government spending were required to restore economic prosperity.
In fact, the 1930s Keynesian model that was used to sell the idea of fiscal stimulus to Americans was eliminated from economics decades ago.And this abandonment of Keynesian multipliers does not reflect any ideological or partisan issues that divide conservatives and liberal economists. Rather, it is because the old Keynesian model does not come anywhere close to meeting today’s standards for economic analysis.
Of course, I never believed this spending had anythig to do with a “crisis” except to use that scare word to seize power. We now have Government Motors, run by a 31 year old Obama politico, a Wage Czar, government controlled banks and nationalized medicine coming up. The economy can go its merry way – Obama and his crowd have gotten what they want.