Sunday, January 03, 2010

The NY Times Editorial Page Fails Logic

Avoiding a Japanese Decade

"The green shoots are barely out of the ground and Republicans and conservative Democrats in Congress are already demanding that the administration “do something” to cut the budget gap. We worry that the political drumbeat may be too hard to resist. In 1997, after three years of tepid growth, the Japanese government stopped its stimulus: it raised a consumption tax, ended a temporary income tax cut, increased social security premiums and nipped recovery in the bud."

What an inane counterfactual. The idea that it is the government's job to spend us out of a recession is conveniently popular with the government that gets to spend all of that money to increase their own influence, power, and status. We've been overstimulating the economy for 10 years, using deficit spending to pay for all sorts of nonsense like full price prescription drugs and wars against countries that couldn't attack us. Adding more stimulus is so unbelievably risky, it risks the very status of our currency and out ability to borrow money.

Of course, we have genius bankers making these decisions, guys that are so full of ego they think they can completely orchestrate the economy by moving the fed funds rate.

Stimulus doesn't work- we tried it from 2001-2009, and look what we got. On the other hand, government fiscal discipline will allow more money to go into the job creating sectors of the economy, not make work to siphon tax dollars.

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