In this Carolina Journal article, the Locke Foundation's Dr. Roy Cordato dissects Obama's "stimulus" plan with clarity and precision.
Cordato provides a free Econ 101 lesson that you won't find in most university classrooms.
Many pundits claim that we cannot judge the potential effectiveness of Obama’s
plan until the specifics are made clear. But, in fact, the problem is not with
the details but with the idea that government can spend an economy out of
recession. Every dollar that the government funnels into the ailing economy
ultimately has to be diverted from other activities in that same economy.
...
Furthermore, this displacement of private sector control over resources occurs even if all of the money is borrowed from foreigners, which some are arguing is likely to be the case. This is because when government spends money, regardless of where it comes from, it automatically diverts resources away from private sector usage. The spending bids up resource prices, increasing the cost of real private investment and entrepreneurship. This highlights the fact that the real problem is with the increased government spending and not with how the revenues are raised or who provides them.
...
Furthermore, this displacement of private sector control over resources occurs even if all of the money is borrowed from foreigners, which some are arguing is likely to be the case. This is because when government spends money, regardless of where it comes from, it automatically diverts resources away from private sector usage. The spending bids up resource prices, increasing the cost of real private investment and entrepreneurship. This highlights the fact that the real problem is with the increased government spending and not with how the revenues are raised or who provides them.
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