Quote:
Originally Posted by Messianic
[You must be logged in to view images. Log in or Register.]
What does it stimulate? Genuine economic growth, or phony GDP/Job numbers? I'd argue the latter, based on Bush+Obama's escapades in stimulus. Both were heavy stimulus abusers.
No one can show or prove that the stimulus was a success. We're just expected to believe it worked. I've looked at the numbers - even the job creation/saved numbers the presidency provides puts the cost of each job at $200,000 or higher. Countries that didn't stimulate are recovering far faster than we are.
|
I'm not sure how you differentiate between genuine and phony growth, but government spending does have a real economic impact. In a strong economy, you can argue that the government crowds out private enterprise, but in a weaker economy government spending serves to replace the spending which was lost in the private sector. The government pays employees itself, and pays private contractors. These people go out and spend their money, which creates growth. As the private sector becomes stronger, the government should step back its spending. This way, the government promotes growth without crowding out private businesses.
With regards to the stimulus, yes it was expensive and yes it didn't help as much as anticipated, but it did have a real economic impact. The CBO estimated that the stimulus act would decrease the GDP by 0.1% to 0.3% in the long term, but would increase it by 1.1% to 3.3% in the short term (
chart). I don't know if you would define this as a success or not, but it did help the economy from falling into a deeper recession.
I don't know much about countries who did not attempt to stimulate their economies, but you can look at Germany as an example of a successful stimulus program. Right now Germany is one of the most successful countries in the world, and they spent $110 billion on stimulus. This comes out to about 1.5% of their GDP, whereas the U.S. spent about 2% of its GDP on stimulus. The difference between the German and U.S. stimulus is Germany had a deficit reduction plan as part of its stimulus. Germany used short term deficit spending to stimulate the economy, while minimizing its impact on long term debt. This created growth without worrying investors and creating problems down the road. The U.S. needs to follow a similar path to ensure that we don't see the gains from the stimulus wiped out by debt. Reckless stimulus spending does more harm than good, but responsible stimulus can be a powerful tool to promote growth.