Post by jgaffney on Dec 16, 2008 16:03:09 GMT -5
Pelosi is gearing up to pass a lollapalooza of a stimulus package - a "shock-and-awe" spending bill that will set a new high (or low) for federal intervention in the private sector. The Obama has already indicated that he will sign it, even if he has to stop and count all of the zeroes in the total spending.
There's just one problem, other than a lack of available capital: spending splurges like this are not always the most effective way to revive an economy. The Wall Street Journal has this:
Barack Obama-san
As January 20 nears, Barack Obama's ambitions for spending on the likes of roads, bridges and jobless benefits keep growing. The latest leak puts the "stimulus" at $1 trillion over a couple of years, and the political class is embracing it as a miracle cure.
Not to spoil the party, but this is not a new idea. Keynesian "pump-priming" in a recession has often been tried, and as an economic stimulus it is overrated. The money that the government spends has to come from somewhere, which means from the private economy in higher taxes or borrowing. The public works are usually less productive than the foregone private investment.
In the Age of Obama, we seem fated to re-explain these eternal lessons. So for today we thought we'd recount the history of the last major country that tried to spend its way to "stimulus" -- Japan during its "lost decade" of the 1990s. In 1992, Japanese Prime Minister Kiichi Miyazawa faced falling property prices and a stock market that had sunk 60% in three years. Mr. Miyazawa's Liberal Democratic Party won re-election promising that Japan would spend its way to becoming a "lifestyle superpower." The country embarked on a great Keynesian experiment:
The rest of the article gives a very good summary of the experiences in Japan. The bottom line for Japan was that the economy grew anemically, but the debt exploded. The article concludes with, "Now we're told that a similar spending program -- a new New Deal -- will revive the U.S. economy. How do you say "good luck" in Japanese?"
Is it just me, or were the Democrats clobbering the Republicans over the size of the debt during the campaign? Did all of that go right out the window after the election?
There's just one problem, other than a lack of available capital: spending splurges like this are not always the most effective way to revive an economy. The Wall Street Journal has this:
Barack Obama-san
As January 20 nears, Barack Obama's ambitions for spending on the likes of roads, bridges and jobless benefits keep growing. The latest leak puts the "stimulus" at $1 trillion over a couple of years, and the political class is embracing it as a miracle cure.
Not to spoil the party, but this is not a new idea. Keynesian "pump-priming" in a recession has often been tried, and as an economic stimulus it is overrated. The money that the government spends has to come from somewhere, which means from the private economy in higher taxes or borrowing. The public works are usually less productive than the foregone private investment.
In the Age of Obama, we seem fated to re-explain these eternal lessons. So for today we thought we'd recount the history of the last major country that tried to spend its way to "stimulus" -- Japan during its "lost decade" of the 1990s. In 1992, Japanese Prime Minister Kiichi Miyazawa faced falling property prices and a stock market that had sunk 60% in three years. Mr. Miyazawa's Liberal Democratic Party won re-election promising that Japan would spend its way to becoming a "lifestyle superpower." The country embarked on a great Keynesian experiment:
The rest of the article gives a very good summary of the experiences in Japan. The bottom line for Japan was that the economy grew anemically, but the debt exploded. The article concludes with, "Now we're told that a similar spending program -- a new New Deal -- will revive the U.S. economy. How do you say "good luck" in Japanese?"
Is it just me, or were the Democrats clobbering the Republicans over the size of the debt during the campaign? Did all of that go right out the window after the election?
