Saturday, January 17, 2009

Backlash to Government Fiscal Stimulus

Terence Corcoran gives a clear eyed look at the Tory's planned fiscal stimulus package in the Financial Post today. (here)

Except for one problem: What if it's not true? What if, as a wide and growing school of economists now suspect, the government spending and stimulus theory is a crock that is shovel-ready to be heaved out into the barnyard of economic waste?

The Prime Minister, in his comments on Friday, seemed to be riding right into the barnyard. He said the government would be simply "borrowing money that is not being used" and "that business is afraid to invest." By borrowing that money, and turning it over to all the groups and interests looking for part of the stimulus spending, he would be jump-starting activity while the private sector got its legs back.

Even disciples of Keynes, such as Harvard's Greg Mankiw, recently highlighted economic studies that show government spending binges -- shocks, they are sometimes called -- don't seem to help the economy grow. They might even make it worse.

We're now seeing the effects of the Coalition's attempt at a coup. The Conservatives are taking advice from likes of the NDP and putting together this ridiculous budget. How Layton railed that the Harper government "wasn't doing anything." Boy, I wish Harper stuck to not doing anything.

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