Wednesday, January 28, 2009

The President vs. Economists

The Cato Institute has ran a full page ad today in most major newspapers across the country defending the view that President Obama was wrong when he said, "There is no disagreement that we need action by our government, a recovery plan that will help to jump-start the economy." The ad contains the names of over 200 accomplished economists, including Nobel laureates James Buchanan, Edward Prescott, and Vernon Smith. The ad and relevant resources can be found here. The statement reads:
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.
This should cause skepticism towards the idea that a fiscal "stimulus" will have a positive effect on the current economic crisis.

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