Economists say no:
“I think (doing) nothing would have been better,” said Ed Yardeni, an investment analyst who’s usually an optimist, in an interview with McClatchy. He argued that the plan fails to provide the right incentives to spur spending.
“It’s unfocused. That is my problem. It is a lot of money for a lot of nickel-and- dime programs. I would have rather had a lot of money for (promoting purchase of) housing and autos . . . . Most of this plan is really, I think, aimed at stabilizing the situation and helping people get through the recession, rather than getting us out of the recession. They are actually providing less short-term stimulus by cutting back, from what I understand, some of the tax credits.”
It won’t slow them down, of course. Because it’s not really about “stimulus.”
As a commenter over at Instapundit noted a few weeks ago, a government providing stimulus is like an ugly and uncoordinated person performing a lewd dance. Even if the intent is to stimulate, the effect is exactly the opposite.
[Afternoon update]
The shock doctrine:
Last year the US economy was hit with one shock after another: the Bear Stearns bail-out, the Indymac collapse, the implosion of Fannie Mae and Freddie Mac, the AIG nationalisation, the biggest stock market drop ever, the $700bn Wall Street bail-out and more – all accompanied by a steady drumbeat of apocalyptic language from political leaders.
And what happened? Did the Republican administration summon up the spirit of Milton Friedman and cut government spending? Did it deregulate and privatise?
No.
It did what governments actually do in a crisis – it seized new powers over the economy. It dramatically expanded the regulatory powers of the Federal Reserve and injected a trillion dollars of inflationary credit into the banking system. It partially nationalised the biggest banks. It appropriated $700bn with which to intervene in the economy. It made General Motors and Chrysler wards of the federal government. It wrote a bail-out bill giving the secretary of the treasury extraordinary powers that could not be reviewed by courts or other government agencies.
Now the Obama administration is continuing this drive toward centralisation and government domination of the economy. And its key players are explicitly referring to heir own version of the shock doctrine. Rahm Emanuel, the White House chief of staff, said the economic crisis facing the country is “an opportunity for us”. After all, he said: “You never want a serious crisis to go to waste. And this crisis provides the opportunity for us to do things that you could not do before” such as taking control of the financial, energy, information and healthcare industries.
That’s just the sort of thing Naomi Klein would have us believe that free-marketers like Milton Friedman think. “Some people stockpile canned goods and water in preparation for major disasters,” Klein wrote. “Friedmanites stockpile free-market ideas.” But that is exactly what American left-liberals have been doing in anticipation of a Democratic administration coming to power at a time when the public might be frightened into accepting more government than it normally would.
As is often the case when the left accuses the right of something (lying, racism, hate), Naomi Klein’s thesis is simple projection.
Do business in cash; don’t buy anything flash; and buy only gold for your stash.
Eventually though all of those will both be illegal of course.
We’ll know the economy is bad when people start hoarding lindens.
I stopped hoarding money recently, then went into a spending frenzy. Prices dropped at the time, and I suspect all these money injections will cause inflation eventually. At least this way I have tangible assets rather than paper, or actually electrons. What was that saying? When there’s blood in the streets, its time to buy?
I disagree with the man asking for more car and house credit. I mean, wasn’t the bubble bad enough already? Do we want a Japanese like economic stagnation due to excess credit?
I look at it this way: The correct response to this was to do nothing. That is essentially what they did, an extremely expensive nothing. So it will work – the nothing they didn’t do will make the economy rebound in late 2009, and they will take credit for it.
Of course, they have started the next crisis – the Federal credit crisis. As soon as the “emergency” is over, the rest of the world will look around and decide that dollars are not the best thing to be holding. So they will slowly start selling – which will make inflation smack down our currency (even worse than the Euro), and make our interest rates go through the roof!
…which, when it hits, will of course be blamed on the newly-restored Republican majority in Congress.