6 thoughts on “Surprise, Surprise”

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  5. I think this quote is typical of the new attitude about Keynesian spending.

    An Obama administration official told FOXNews.com that “it is not as simple as looking where the money goes. You could have someone who lives in Maryland and works in Virginia and they are benefited from money given to the Virginia firm even though they live in Maryland.” She also noted that it didn’t really matter who got the money because “giving out money is good for everyone. If you give the money to an old person, they will spend it and that will create more jobs.”

    Just imagine that the Obama administration cut taxes (or had left the Bush tax cuts in place) instead of increased spending and had done so distributed in a similar manner as described in the Fox story. You know what we’d call that policy? Trickle down economics. It’ll be interesting to contrast this approach with the Reagan one.

    One important distinction to make is that a tax cut can be far less discerning than a spending increase and still improve the efficiency of the US economy. In other words, you can be quite casual about what taxes are cut and still get a better economy. Effectively, you’re removing an economic roadblock. There may be some odd consequences (like a reduction in capital gains tax relative to corporate and dividend taxes resulted in a boost to growth stocks), but it’s better than before.

    On the other hand, poorly thought out spending increases are likely to result in considerable unintended consequences as some parties radically change their behavior in order to exploit loopholes and get more of that money. For example, paying farmers not to farm just doesn’t make sense unless one believes as above that giving money for a perverse reason still somehow helps everyone.

  6. The government has to take it to give it and adds inefficiency every time. Basically the government acts like a slot machine. While it may point to some winners the benefits go mainly to those that don’t add to the economy.

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