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August 30 2010

Do we need a second stimulus?

Hadley Heath

No - please - anything but that!

In policy debates, it's commonplace to see two different interpretations of historical events as part of opposing arguments about what to do next.  The $787 billion stimulus package of 2009 is hardly old enough to be called a "historical event," but already reports vary about its effects.

This weekend the New York Times ran an op-ed by Laura Tyson - a member of Obama's Economic Recovery Advisory Board - about how great the first stimulus was and how a second stimulus is the answer to our stagnated growth and unemployment problems.  She writes:

There is too much worry about the size of government, and too little appreciation for how stimulus spending has helped stabilize the economy and how more of the right kind of government spending could boost job creation and economic growth.

I must say, I really disagree.  Too much worry about the size of government?  Try telling that to our Founding Fathers.

While Tyson makes the case (like President Obama did on "The View") that the stimulus "saved" thousands of jobs and kept a much-worse alternative from coming true, I wonder how many more jobs were never created because of the widespread uncertainty that businesspeople have faced under this administration.  Tyson argues for government-created jobs.  But the nature of these jobs, in the works-progress-administration-type system she suggests, is temporary, unsustainable, and a bad use of tax dollars.

Tyson writes, "Two forms of spending with the biggest and quickest bang for the buck are unemployment benefits and aid to state governments. The federal government should pledge generous financing increases for both programs through 2011."  Yet it seems the real solution to unemployment is employment, not asking the unemployed to continue to put government benefits back into the economy through spending on necessities just to make ends meet.  That's unfair to the unemployed, who lose important skills while they are unemployed, and ignores the reality that providing transfer payments to the unemployed means government has to take money out of the private sector - from taxpayers and would-be entrepreneurs.  How does that help job creation?

It is true that state governments are facing budget problems.  But have Tyson and Obama considered the impact that the Patient Protection and Affordable Care Act will have on states?  Funding this federal program will cost states big bucks.  Maybe the best "aid to state governments" would be a repeal of this legislation!

The argument for a second stimulus is based on the idea that the first stimulus was successful.  We should be careful before trusting politicians and their mouthpieces who promise rosy outcomes.  After all, during this "summer of recovery," we've heard a lot of "disappointing," or "unexpected" realities that differ from the predicted outcomes.  The real stimulus the economy needs will come from individuals who are free to invest and spend without the government's interference.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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