The Best Anti-Stimulus Argument?
Matthew Yglesias thinks that Kevin Murphy’s argument as to why the fiscal stimulus package could be a bad idea is the best he has seen. What I want to know is what turnip truck did Matthew just fall off of? This is the argument most of the people who are not so keen on a fiscal stimulus package are making. Murphy’s argument boils down to: If the proportion of idle resources and the value of those idle resources is small enough and then they wont overcome the effects of government waste/inefficiency and deadweight loss.
And instead of providing empirical evidence that the numbers are such that fiscal stimulus is justified what do we get? Nothing but speculation from Brad DeLong and some nonsense about different forms of efficiency without explanation from Matthew. And I have to admit that Prof. DeLong’s assertion that government inefficiency is zero is amusing. Do we need to trot out the articles about the Pentagon simply losing track of tens of billions of dollars? The articles about how a good chunk of the funds in the current stimulus package wont be available until 2010 and later? Pshaw…why that actually represents government efficiency.
And lets not forget the lessons of public choice theory. Are we to expect the rich and powerful to idly by while nearly a trillion dollars are injected into the economy? Or are various special interest groups, industrial and commercial advocacy groups, large corporations, and city and state governments going to send in their lobbyists to try and get as much as they can? Yet from all this, there will be no inefficiencies?
Update: Good quote from James Hamilton,
On the other hand, if everybody and their grandmother is lining up for a bailout, and pulling political strings (, ) to make sure they get it, I read that as prima facie evidence that the taxpayers’ interests are not being properly represented.
This is absolutely correct but the prevailing attitude right now is that deficits and the tax payer don’t matter at all. Take for example Paul Krugman’s erroneous view that deficits in the current situation aren’t that big a deal because it is money we largely owe to ourselves. This kind of boneheaded thinking is not good and yes, we have to think about the taxpayers. Maybe one can argue that being overly cautious about fiscal imbalances right now is not appropriate, but saying that they simply aren’t important at all right now and we’ll sort it out later when other really large fiscal imbalances are starting to become an issue is…short sighted in the extreme.