David Kirkpatrick

July 10, 2009

Debating the stimulus

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 5:14 pm

I have a feeling this is a discussion that will continue through the 2010 election cycle and maybe even into the 2012 presidential race if the economy remains soft for that long.

Many people don’t realize presidents pretty much live and die by economic cycles, and these cycles are almost entirely outside control by the White House. Just by polling it’s clear Obama has ownership of the current horrible economy and the immediate fire-brigade his administration was forced to put into action. It’s worth noting, to keep things in perspective if nothing else, he was handed a flaming bag of dog poop from one of the worst eight years of economic oversight, spending, saving and planning all coming from a Bush administration that was supposed to be fiscally conservative.

From the link:

And so, stimulus proponents argue, the only remaining actor with the capacity to boost total spending significantly is government. If government fails to act, they warn, the economy is likely to languish for years to come.

Stimulus opponents see things differently. In a recent Forbes column, UCLA economist Lee Ohanian attributed their skepticism to their belief that “the higher taxes on incomes or expenditures that ultimately accompany higher spending depress economic activity.” According to this argument, if the government borrows money to stimulate spending now, people will realize that the resulting debt will necessitate higher taxes in the future. And that realization will cause them to curtail their own current spending further, thereby offsetting the stimulus.

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