I was checking out some stories that friends had put up on Facebook, and thought that Dominic Lawson neatly sums up the flaws in Obama's new deal in today's Sunday Times. We tried this whole spending spree idea once before and it left us in a state of depression/recession for over a decade.
As for the open letter to President Obama in the New York Times, it is signed by over 200 economists, including Nobel laureates Vernon Smith, James Buchanan, and Edward Prescott as well as CMC professors Richard Burdekin and Marc Weidenmier (two professors whose opinions I personally take very seriously). Even Eugene Fama, who will probably join the ranks of Nobel winners, has put his signature on the letter.
Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we the undersigned do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan's "lost decade" in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.
For the whole letter, click here.
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