Yesterday, to the shock of absolutely no one, NYT columnist Paul Krugman called for yet another stimulus.
Obviously here at NTU we’re going to oppose any serious uptick in government spending, but what really irks me is the justification. The argument is that because it (apparently) wasn’t big enough the first time, we need to do it again. Instead of ‘this didn’t work, perhaps I was wrong’, the thinking is, ‘I know I’m right, why didn’t this work’.
Let’s establish something: The Stimulus Didn’t Work. It was advertised as a kick-start to growth and would keep unemployment below 8%. Our economy has been treading water and unemployment is up to 9.6% as of August (16.7% including those who’ve given up looking). Instead of saving us, economists are discussing the probability of a double-dip recession. Anyone who points to GDP growth is intellectually lying to themselves as government spending is a factor in the GDP calculation, by definition it increases!
It’s no mystery why the stimulus didn’t work. It’s not that it wasn’t big enough; it’s that government spending is a massive misallocation of capital. Instead of allowing the economy to fix itself (letting bad businesses fail, workers move on, investment to shift to better opportunities) we’ve subsidized failure, told workers to stay put, and thrown billions at projects that the market would never deem worthy.
Long story short, there's no doubt another stimulus will do the same thing the first one did: prolong our recession.