Stimulus plan

Shawn Ritenour over at the Ludwig von Mises Institute has the best analysis of the stimulus and its effects that I have seen. The stimulus I am taling about is the one that was rushed through in January without anyone having read it and that has failed miserably to stimulate the economy as promised.

There is much more in the article, but this sums it up perfectly:

"From an economic perspective, Obama's stimulus plan is equivalent to a giant welfare scheme. Instead of the money going to lower income Americans, however, it is meant to go to municipal bureaucrats of various stripes. Instead of productive American citizens determining what to do with their own scarce resources, the state is stepping in and dictating how they will be used. Consequently, such spending is essentially government consumption, which is what vulgar Keynesians think we need now more than ever. Such economists are shocked — shocked! — to find out that Americans are now saving any increases in income instead of blowing it on even more consumer goods. Not to worry, however. If private citizens do not consume enough for official tastes, the government always can.

Certainly we can expect that when the government spends a trillion dollars this will provide a positive statistical boost to GDP, if for no other reason that government spending makes up a significant portion of GDP. Where, however, does the state get the money to spend? Ah, as Hamlet might say, there's the rub. There are only three ways the government can obtain funds to throw at all their shovel-ready projects and all three leave in their wake negative economic consequences."

Read the whole thing.