Harvard economist Robert Barro, also at the Hoover Institution, gives a technical, though simple-so-that-I-can-understand-it, explanation of why the Democrats' "stimulus" spending package will fail to stimulate anything, apart from perhaps Chris Matthews' leg.
Read "Government Spending Is No Free Lunch" (Wall Street Journal, Jan. 22, 2009).
But, in terms of fiscal-stimulus proposals, it would be unfortunate if the best Team Obama can offer is an unvarnished version of Keynes's 1936 "General Theory of Employment, Interest and Money." The financial crisis and possible depression do not invalidate everything we have learned about macroeconomics since 1936.
Much more focus should be on incentives for people and businesses to invest, produce and work. On the tax side, we should avoid programs that throw money at people and emphasize instead reductions in marginal income-tax rates -- especially where these rates are already high and fall on capital income. Eliminating the federal corporate income tax would be brilliant.
I find it interesting that we are speaking of this stimulus package as something necessary for "jump starting the economy," as though the economy were a car, and as though it were at a stand still.
But this is rhetoric in the service of covering up a duplicitous government. The Democrats are not interested primarily in economic recovery. That will come eventually, one way or another, in the natural cycle of things. They see this crisis and the unprecedented breadth of power we have handed them as an opportunity to fund "just about every pent-up Democratic proposal of the last 40 years" ("A 40-Year Wish List," Wall Street Journal editorial, Jan. 28, 2009).
Also of interest is that 57% of Americans believe that tax cuts are generally good for the economy compared to 17% who believe they are bad, according to Rasmussen Reports.