Posted by Rojas @ 1:07 pm on January 29th 2009

Stimulating

The concept of an economic “stimulus” implies a business cycle in which federal policy can alter the amount of economic activity. During a period of recession, increased spending would in theory enhance economic growth. The corollary to this is that, when the boom period returns, this same sort of spending would be inflationary and, hence, fiscally unwise.

The current Republican objection to the Democratic stimulus package is that much of the spending involved isn’t perceptibly related to economic stimulus. Not isolated examples, either, but great big heaping gobs of it. Much of the spending occurs more than eighteen months down the road, well after the “crisis point” which allegedly justifies the spending. Much of it is targeted to activities such as the computerization of hopsital records to which the economic multiplier effect does not apply.

It seems to me that the Democrats have a way out of these objections. All they have to do is accept a sunset provision in the programs they’re enacting. In other words: once we return to a period of verifiable economic growth, all of the high-speed rail programs, all of the educational infrastructure buildup, all of the alternative energy goodies–all of those are automatically cancelled.

Why not? There’s no jutification for economic stimulus in a growth environment, particularly not during a period of high deficits. It seems to me that to insist that this spending become permanent is to more or less grant the Republican argument that it isn’t really stimulus spending at all.

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