The big stimulus bill in Congress now won’t help much the economy much, says Nobel laureate and economist Gary Becker.
The "net stimulus to GDP would likely be quite small," he says, along with Kevin Murphy, writing jointly in The Wall Street Journal.
Becker makes four points to back his argument, which are:
• How much increase in economic output can be expected from the stimulus package? Not much, say the writers, because according to the plan the government would have to curtail spending for some purposes in order to spend on others.
• Nor is the stimulus really temporary, they point out. Increased government spending is supposed to support the economy back to full employment, but it probably won't expire, or sunset, as politicians put it. History shows that once a program is in place it tends to remain, they write.
• The impact on consumers and business will also depend on how valuable the spending is. The money put in taxpayer’s hands will be spent quickly. But money spent in a hurry is seldom spent wisely, the argue.
• Finally, there’s taxes. The increased federal debt caused by this stimulus package has to be paid for, eventually, through higher taxes on households and businesses, say Becker and Murphy.
Becker is not alone in his criticism of the stimulus plan.
Peter Ferrara, who served in the White House Office of Policy Development under President Reagan, also said in the Journal, "We are stuck going exactly in the wrong direction on economic policy because of currently ideological fashions.”
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