Commentary Magazine


Contentions

We’ll All Have to Live With It

So what’s wrong with the stimulus? Just about everything. But three considerations top the list.

First, the Keynesians did a darn poor job of constructing a stimulus bill. The Wall Street Journal editors point out:

The original economic theory behind this bill was to spend the money quickly to create jobs fast. But even the most talented spenders on Capitol Hill couldn’t find enough projects to fund in such a rush. So they spread out the largesse over several years — long after everyone hopes the recession is over. Some of these “timely” stimulus payments won’t hit the economy until after the 2016 Olympics.

Second, government spending is unlikely to go down anytime soon. (If you doubt how hard it is to remove government add-ons, take a look at the Department of Education and Public Broadcasting — they are now untouchable.) We are setting a new trajectory for spending, one that will take an ever greater share of the economy to sustain. And there is, after all, a rather strong correlation between countries with a large share of GDP devoted to the government and low growth. (Logically, the money is going someplace other than productive economic activity.)

Third, the result of this will be an historically high level of debt in the next few years — perhaps 13.5% of the economy. The editors caution:

The new spending means new federal debt in the trillions of dollars over the next few years, which will test the limits of America’s credit-worthiness. To the extent that taxes rise to pay for it all, the U.S. will become less desirable as a destination for the world’s capital. Perhaps the Federal Reserve will try to inflate away this growing debt, but the world’s bond vigilantes will get a vote on that.

That’s not a very comforting picture. And we haven’t even looked at the banking crisis. It may be small solace for Republicans to say they didn’t vote for this. The reality is that we will all have to live with the consequences – for years to come.



Join the discussion…

Are you a subscriber? Log in to comment »

Not a subscriber? Join the discussion today, subscribe to Commentary »





Welcome to Commentary Magazine.
We hope you enjoy your visit.
As a visitor to our site, you are allowed 8 free articles this month.
This is your first of 8 free articles.

If you are already a digital subscriber, log in here »

Print subscriber? For free access to the website and iPad, register here »

To subscribe, click here to see our subscription offers »

Please note this is an advertisement skip this ad
Clearly, you have a passion for ideas.
Subscribe today for unlimited digital access to the publication that shapes the minds of the people who shape our world.
Get for just
YOU HAVE READ OF 8 FREE ARTICLES THIS MONTH.
FOR JUST
YOU HAVE READ OF 8 FREE ARTICLES THIS MONTH.
FOR JUST
Welcome to Commentary Magazine.
We hope you enjoy your visit.
As a visitor, you are allowed 8 free articles.
This is your first article.
You have read of 8 free articles this month.
YOU HAVE READ 8 OF 8
FREE ARTICLES THIS MONTH.
for full access to
CommentaryMagazine.com
INCLUDES FULL ACCESS TO:
Digital subscriber?
Print subscriber? Get free access »
Call to subscribe: 1-800-829-6270
You can also subscribe
on your computer at
CommentaryMagazine.com.
LOG IN WITH YOUR
COMMENTARY MAGAZINE ID
Don't have a CommentaryMagazine.com log in?
CREATE A COMMENTARY
LOG IN ID
Enter you email address and password below. A confirmation email will be sent to the email address that you provide.