Its’ time for the GOP to step up opposition to “stimulus” plan

Last year Newt Gingrich said this:

“Well, I hate to say it this way, but Republican politicians don’t like to think. I think as a group, they get together and chant slogans. And they find it very hard to pay attention to the serious fundamental lessons that are necessary.”

Now that Democrats hold all the power in D.C. (as they do here in Illinois), it’s time for our elected Republicans think and act differently so more Americans will be reached with a winning message. The era of slogan chanting must end, and the era of thinking – and acting anew – must begin.

Last month in the Wall Street Journal Harvey Golub wrote an article titled “Getting Out of the Credit Mess; The last thing we need is policy that encourages or incurs more debt.”

It’s worth reading – and two lines in particular stood out that apply to more than just the issue of the credit mess. Both were simple, but important. He wrote:

“To begin to understand today’s problem, we have to have a sense of how we got there.”

Too many Americans still don’t understand how we arrived where we’re at regarding today’s economy. And they certainly don’t grasp the significance of planned government action. Golub said:

“[W]ill these actions reduce the depth and duration of the recession? Or, in the long run, will they make matters even worse?”

Before the public will get the message about how we got here and where we need to go, our Republican elected official must grapple with the material so they understand it fully. Then they must get serious about aggressively selling to the public a counter-proposal to the proposed Obama-Reid-Pelosi spending boondoggle.

Golub writes that there was an “intellectual start of this mess…” There always is. There is also an intellectual start for a clean-up.

We must stop pretending we’ve elected statesmen and stateswomen. Their job is sales, and these elected salesmen and saleswomen on the Republican side had better start getting serious about learning the facts and communicating a compelling plan to the country.

Golub concluded his article this way:

“To solve this problem for ourselves and future generations, we must get back to our historic reliance on personal responsibility and market forces, and get government out of economic management. It doesn’t do a good job, as the current economic mess amply proves.”

The following quotes were compiled by the office of U.S. House Republican leader John Boehner. I applaud the work that went into compiling this list, and hope that Boehner and his colleagues get to work on a coast to coast full court press getting this message out to Americans through every possible venue.

Web postings are great, but unless the information reaches more people, we’ll continue to lose elections.

Stimulus Spending Skeptics: Economists Express Doubts About Trillion Dollar Spending Plan

Contrary to assertions by some leading Democrats, there are plenty of American economists expressing serious reservations about the idea that dramatic increases in government spending will lead to economic recovery. Following is a sample of comments submitted online to House Republican Leader John Boehner (R-OH) in recent weeks by economists from across the nation:

“A stimulus package of this magnitude is likely to contain many projects that are poor investments.”

Alan Viard,

Resident Scholar, American Enterprise Institute

“Government spending does not create incentives for labor, innovation and investment. Instead of spending $1 trillion in Washington, let Washington forgive $1 trillion in tax revenues to create incentives for millions of individuals and firms to get the economy going again, one dollar at a time.”

Donald Luskin

Chief Investment Officer, Trend Macrolytics LLC

“I have concerns about a stimulus spending bill. I think there are two criteria that may justify additional spending: 1. The spending passes a long-term cost-benefit test. That test may be less rigorous now that we are in a period of extremely low interest rates, but it should still be passed. 2. Alternatively, the spending can be implemented very quickly and will have a significant impact on employment. I highly doubt there are $1 trillion of new projects that meet one or both of these tests. I would rather see a temporary suspension of some or all of the payroll tax.”

Philip Levy

Resident Scholar, American Enterprise Institute

“The only way Congress can spend money is to extract it from the private sector – either by taxing it, borrowing it, or seignorage. The question then becomes: will Congress spend that money more wisely than the private sector would have spent it? The answer appears to be no. Congress typically spends according to its political priorities, not economic priorities.”

Michael Cannon

Cato Institute

“It is time for voters to wake up to the fact that government cannot create jobs. It can only shift jobs from one part of the economy to the other. It is entrepreneurs who create jobs, and it is consumers who judge whether those jobs are the best jobs to be created. The government contributes best by establishing a rule of law and protection of property rights that allows entrepreneurs and consumers to act in their best interests.”

Antony Davies

Associate Professor of Economics, Duquesne University

“The stimulus plan will most probably turn quickly into pork spending. Marginal rate tax cuts would be a much more effective way to stimulate demand along with cuts in the capital gains and corporate tax rates. Evidence shows that marginal tax cut multipliers are much higher than spending multipliers. In addition the Fed is still not out of ammunition.”

Joseph Zoric

Associate Professor of Economics, Franciscan University of Steubenville

“Fiscal stimulus may have symbolic value and certainly does provide an expedient for distributive politics, but there is NO evidence that it contributes to GDP or economic growth more broadly.”

Edward Lopez

Associate Professor of Law and Economics, San Jose State University

“The empirical evidence overwhelmingly rejects federal government deficit spending as the best method for stimulating the economy, and is generally unsupportive of it having any stimulus effect at all.”

Justin Ross

Assistant Professor of Economics, School of Public and Environmental Affairs, Indiana University

“There is not only the problem that efficient projects are often slow to get to the point where they generate actual expenditures, but also that once the government starts spending it is hard to turn off the tap when the stimulus is no longer needed.”

Thomas Mayer

Professor Emeritus, University of California -Davis

“The stimulus plans assume consumption is the source of economic growth. It is not. It is the consequence of said growth. The ‘stimulus’ is a redistribution of spending, at best, and will do little to help. The next Administration should avoid large scale programs and experimentation and allow the marketplace to correct the errors made by the last 8 years of misguided intervention.”

Steven Horwitz

Charles A. Dana Professor of Economics, St. Lawrence University

“Any so-called stimulus program is a ruse. The government can increase its spending only by reducing private spending equivalently. Whether government finances its added spending by increasing taxes, by borrowing, or by inflating the currency, the added spending will be offset by reduced private spending. Furthermore, private spending is generally more efficient than the government spending that would replace it because people act more carefully when they spend their own money than when they spend other people’s money.”

Richard Wagner

Professor of Economics, George Mason University

“Want to grow the economy without inflation? Cut marginal tax rates, slash the corporate rate, expense investment in the first year (instead of depreciation), keep tax rates low on dividends and capital gains, and repeal the death tax. Have the Federal Reserve focus on price stability and a sound dollar, and on not generating a monetary roller coaster. (That, in part, is what caused the housing and commodities bubbles.) Rein in government spending to pay for the tax cuts, and trim senseless regulation.”

Stephen Entin

President & Executive Director, Institute for Research on the Economics of Taxation

“Rather than old style Keynesianism we should reduce the corporate income tax substantially. The problem is not lack of demand, but rather a lack of investment. By reducing the corporate income tax, among the highest in the industrialized world, we will increase the incentive for companies to invest in new equipment, technology, research and development, and buildings. This will increase productivity in the long run, leading to higher GDP and higher wages.”

Gary Wolfram

William Simon Professor of Economics, Hillsdale College

“Government ‘infrastructure spending stimulus’ programs in Japan during the 1990s produced no stimulus, but rather a vast overhang of government debt. Bridges, tunnels, roads, and trains to nowhere stimulate nothing. It is productivity growth that counts, and that comes mainly from the private sector – which is why tax cuts have always been a surer way to economic recovery.”

Lawrence Franko

Retired Professor, University of Massachusetts Boston, College of Management

“There is no convincing evidence that stimulative fiscal policy is either feasible or effective. The recognition and action lags (ancient terms from the bygone Keynesian era) alone virtually always mean that the stimulus arrives after the recession is over, thus causing an undesirable distortion that impedes recovery.”

John Seater

Professor of Economics, North Carolina State University

“The evidence that fiscal stimulus works is weak. Why risk such large amounts on a program with uncertain benefits, especially if the mechanisms to transmit those benefits to the economy are a bunch of pork barrel, second rate projects.”

Charles Reback

Assistant Professor, University of South Carolina Upstate

“Japan in the early and mid 1990s engaged in major fiscal stimulus focused on infrastructure projects with deficits equal to 7-8% of GDP and a cumulative Debt/GDP of almost 150%. None of this led to economic recovery until the late 1990s when the Bank of Japan engaged in quantitative easing of monetary policy and the Government of Japan finally introduced a taxpayer bailout of the banks. The Fed and Treasury in the US have already taken such actions. The Japanese experience suggests that additional fiscal stimulus will only add to the Debt without helping the economy.”

Michael Keran

Retired, Former Sr. VP & Director of Research, Federal Reserve Bank of San Francisco

“Government intervention and ‘stimulus’ in the housing market is largely responsible for the current economic crisis. History has shown that the Obama team’s proposed ‘stimulus’ is not only going to have little to no effect in the short run, but will create a larger bureaucratic structure, lead to tremendous investments in unproductive political lobbying among ‘stimulus project’ wannabes, and dissuade/delay private investment, recovery and growth.”

Michael Sykuta

Associate Professor, University of Missouri – Columbia

“Common sense dictates that any investment, public or private, must take opportunity costs into consideration. It’s never a good idea to waste scare resources, but this is often what occurs when economics gets pushed aside in favor of politics.”

James Garven

Frank S. Groner Memorial Chair of Finance, Baylor University

“Our economy as a whole will [no] benefit from taking money from current or future taxpayers to support a government spending spree. No doubt, certain interest groups will gain from feeding at the public sector trough. But losers surely will outnumber winners by a large margin. Our economy as a whole will benefit from Congress lowering taxes and letting Americans decide for themselves what is worth spending their hard-earned dollars on.”

David Laband

Professor of Economics and Policy, Auburn University

“A government-spending ‘stimulus’ is a very bad idea. Because government can spend only what it has taxed or borrowed away from the public, it creates no new demand but merely redirects it. Recovery depends on profit and loss discipline and public confidence that the basic rules underlying free markets will be followed. The latter is hurt by government interventions such as ‘stimulus.'”

Howard Baetjer

Lecturer, Dept. of Economics, Towson University

“[T]ax cuts will not create the waste [than] government spending would, because individual households are making their own decisions about which spending or investment projects are worthwhile for themselves.”

Alan Stockman

Wilson Professor of Economics, University of Rochester

“During recessions, unemployment rationalizes a role for government in creating jobs. But there is no reason these jobs should be directly working for the government: nothing about a recession justifies larger government. If we are worried about too few jobs, it makes sense to subsidize private employment (for example, by temporarily lowering payroll taxes or creating a new tax subsidy for new hires).”

Glen Weyl

Junior Fellow at the Society of Fellows and Post-Doctoral Fellow in the Department of Economics, Harvard University

“Tax cuts are preferable to spending, especially the many programs that will doubtless result from this process. Even the designated chair of Obama’s CEA finds that increased taxes reduce growth.”

James Butkiewicz

Professor of Economics, University of Delaware

“The current recession was caused by government fiddling with the mortgage market and the moral hazard created by the illusion of government monitoring of financial markets. Increased government involvement in the economy is not the solution.”

Henry Thompson

Professor, Auburn University

“An ‘economic stimulus’ program will do nothing to correct the serious price and resource misallocations that currently exist and are stopping the economy from moving back toward ‘full-employment.’ In fact, they will likely retard the recovery. They will divert resources from the private sector to the government sector moving us further away from a free-enterprise economy.”

Gene Smiley

Emeritus Professor of Economics, Marquette University

“There is ample evidence that large deficit spending packages will be counter-productive. We should focus on tax cuts and on spending proposals where the benefits outweigh the costs. Transferring funds to state governments avoids asking the cost-benefit question and should be avoided.”

King Banaian

Professor, Dept. of Economics, St. Cloud State University

“Government spending is not the road to real economic prosperity. I am particularly concerned about government spending misdirecting opportunities for entrepreneurship and private economic growth.”

Henry Butler

Executive Director, Searle Center on Law, Regulation, and Economic Growth

Northwestern University School of Law

“Governments make lots of a bad policy during times of economic stress. A spending package that approaches $1 trillion is a case in point. Do we really trust the Congress and the Executive Branch to spend such vast sums wisely, especially after all the bumbling around and ill-advised bailouts this year? Does the government really have a long list of well-thought-out, cost-effective projects that will help our economy? I do not think so.”

Scott Bradford

Associate Professor, Brigham Young University

“A spending stimulus will only delay the needed restructuring of the U.S. economy to remain internationally competitive. Tax cuts will facilitate that restructuring far better than spending and job creation by the government.”

Stacie Beck

Professor, University of Delaware

“There is no credible evidence that government spending can create jobs in the long run. Government policies can, however, destroy jobs.”

John Howe

Professor of Finance, University of Missouri

“Japan’s federal expenditures, following their 1989 stock market crash, have had little to no effect on their recovery. Japan has been left with a huge government debt per GDP ratio and nearly 20 years of little to no growth. Why on earth would the U.S. want to follow in Japan’s footsteps?”

Gary Quinlivan

Dean of the Alex G. McKenna School, St. Vincent College

“We must first recognize that government officials must be seen as doing something to fix the economy; however, the plans I have been hearing about, namely developing infrastructure for heretofore impractical ‘green’ technologies, strikes me as an odd approach. Markets still work pretty well and most economists will tell you that government interference with those markets typically causes more harm than good… Entrepreneurs will create a much more efficient outcome if the costs imposed upon them by government are reduced.”

Brian O’Roark

Associate Professor of Economics, Robert Morris University

“Government spending programs like these are political grab-bags whose successes are predicated on satisfying political interest groups, not on creating value and growth in a market economy; these government spending programs then often become embedded ‘entitlements,’ crowding out the flow of funds to private investments in a free marketplace.”

Douglas Houston

Professor, School of Business, University of Kansas

©2009 John Francis Biver