"Calls Grow to Increase Stimulus Spending," says a recent front-page Wall Street Journal headline. Author Deborah Solomon claims, "Some economists are pressuring the White House to enact a second round of stimulus spending." The article mentions only two economists, however, one of whom heads "a left-leaning Washington think tank" (the Economic Policy Institute) that always tries to pressure the government to spend more. The other, a former Bush official, dreams of "something that is relatively fast and thoughtful" like "personal tax cuts." But asking Congress to do something fast and thoughtful is like asking fish to fly.
Ironically, another headline in the same paper on the same day said, "Spending Spooks India's Sensex." The article read: "Indian stocks fell 5.8% Monday amid concern the proposed government budget will add to the country's fiscal deficit."
Investors understand that increased government spending diverts valuable resources away from the private sector and ends up imposing even more demoralizing taxes on labor and capital. READ MORE
by Alan Reynolds
Alan Reynolds is a senior fellow at the Cato Institute, and the author of Income and Wealth (Greenwood Press, 2006).
Added to cato.org on July 10, 2009
This article appeared in Forbes on July 10, 2009.
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