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Calling for a Real Stimulus

August 1, 2013 in Economics

By Doug Bandow

Doug Bandow

The U.S. economic recovery remains anemic, so President Barack Obama wants Washington to spend more money. Of course, if the economy was booming, he would want the federal government to spend even more money.

Nevertheless, the favorite justification for public expenditures these days is to “stimulate” the economy. The fact that $5 trillion in federal deficits during the president’s first four years in office didn’t create a buoyant economy doesn’t matter. If we would just spend a little more, everything would be wonderful.

So desperate is he to spend more that in his Tuesday speech he offered the GOP a deal: reform corporate taxes and have Uncle Sam spend, er, “invest,” the extra money to “create” jobs. Which is what his “stimulus” bill was supposed to do. Some Republicans responded positively, proving that they never learn.

Although the deficit has fallen significantly this year — revenues are significantly higher than expected — the Congressional Budget Office figures that the deficit will begin climbing again in 2015 on its way back to $1 trillion. There may never be a time when Washington will not be “stimulating” the economy.

Unfortunately, government cannot create self-sustaining economic growth. Whatever the short-term benefit of tossing taxpayer money down the rat holes closest to Capitol Hill, in the long-term only productive investment will generate a sustained return. And productive investment is precisely the sort of outlay least likely to emerge from Congress hoping to bring down next month’s unemployment rate.

If all that is needed for prosperity is to increase the number of dollars in circulation, then it would make more sense to load up B-52s with dollar bills and drop the cash all over America. Then everyone, and not just the politically well-connected, could get some of Uncle Sam’s largesse. Moreover, people would have to work for their winnings by locating and collecting the bills. Encouraging people to wander the countryside looking for money could be viewed as an anti-obesity initiative!

Rather than expanding government, a true economic “stimulus” initiative would promote the private sector. One of the best ways of doing so would be to reduce the regulatory burden on U.S. companies. 

From the government’s standpoint, the cost of complying with government rules is a form of off-budget spending, which diverts rather than creates demand. From the individual’s standpoint, regulation is an indirect tax, discouraging economic activity. When the government makes it more expensive to create businesses, develop products, expand operations, employ …read more

Source: OP-EDS

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