Thursday, February 14, 2008

I am not stimulated by the stimulus

First, Greg Mankiw fills me in on the cost per job allegedly to be created by the package: $336,000

Then Art Laffer (and you know he's never wrong) tells me the stimulus will be a net negative for the economy: "any rebate will reduce output because it reduces incentives to produce output. The larger the rebate, the greater the reduction in the incentives to work and the greater the reduction in output. It's as simple as that. This $170 billion rebate camouflaged as economic stimulus will deal a serious blow to the economic health of the country."

Finally, online financial advice columns are advising people to save, not spend, their rebate checks!! People, I give you the wisdom of Suze Orman: "The rebate you're about to get should be saved, not spent. It should be used to pay down debt and build up an emergency savings account. What you need to focus on is not what your government wants you to do for the national economy, but what you can do for your personal financial security. Help yourself first."

How 'bout y'all? Feel stimulated yet?


Simon Spero said...

I say the government should provide a stimulus package in the form of a non transferable mason jars of hard liquor. Make it corn liquor and it'd pass in days.

I mean, has anyone ever woken up from a heavy night drinking to find out they somehow logged into their brokerage account and bought eurobonds?

Anonymous said...

Is Laffer saying that if I am a store owner and some of those people with rebate checks "take" (purchase?) some resources (goods) from me that I'm suppose to feel poorer and lower my demand to offset their increase in demand?

The rebate thing is sorta bogus BUT saying the net effect on AD=0 makes no sense.

Angus said...

I think Art is saying that for every rebate receiver, there is a rebate payer (TANSTAAFL and all), even if the payer is just the future self of the receiver, so on net there has to be a loss of $$ somewhere equal to the amount bestowed.

Ricardian equivalence says the form of paying for current government spending doesn't matter between taxes and borrowing (aka future taxes).

Jeff said...

Suze Orman has just single-handedly dismantled the best attempt of the US Government to save the economy.

She must be stopped-but I fear the legion of Oprah watchers she has at her command will prove too strong.

They grow more powerful by the minute.

zak822 said...

If getting extra money reduces incentives to work and reduces output, why do CEO's get really huge bonus's?

Please pose the question to Mr. Laffer. Me, I'm goin' drinkin'