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Nov 14, 2008

Why Spending Stimulus Plans Fail

Why Spending Stimulus Plans Fail
11/14/08 - WSJ.com by Brian Riedl

What Congress gives to some it takes away from others

[edited]:  Government stimulus bills are based on the idea that feeding new money into the economy will increase demand and production. But, every dollar it injects into the economy must first be taxed or borrowed out of the economy. Value is merely redistributed from one group of people to another. No new spending power is created.

If Congress funds new spending with taxes, it is redistributing existing income. If the money is borrowed from American investors, those investors will have that much less to invest or spend in the private economy. If the money is borrowed from foreigners, the balance of payments must still balance. That means reducing net exports through exchange-rate adjustments, thereby leaving net spending on the economy unchanged.

Fixing "our crumbling infrastructure" has become a new plan for creating jobs. But, before the government can spend $1 billion hiring road builders and purchasing asphalt, it must first tax or borrow $1 billion from other sectors of the economy, which then lose a similar number of jobs.

In other words, highway spending merely transfers jobs and income from one part of the economy to another. As economist Ronald Utt has explained, "The only way that $1 billion of new highway spending can create 47,576 new jobs is if the $1 billion appears out of nowhere as if it were manna from heaven."

Waiting for the jobs Obama is building a new society. I'll wait until he is done.
07/02/09 - Instapundit

Small business owners are standing by the fence and watching, paralyzed by regulatory uncertainty. They aren’t hiring precisely because of government intervention in the economy. So-called stimulus won't change that.

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