Jeffrey A. Miron is a Senior Lecturer and Director of Undergraduate Studies in the Department of Economics at Harvard University and a Senior Fellow at the Cato Institute. He’s published a paper entitled, The Case Against the Fiscal Stimulus, where he explains the problems with the the massive and wasteful Obama Stimulus program.
The report is just 11 pages and is a worthwhile read. Read it in PDF format. We’ve copied the conclusion here:
A few weeks after President Obama’s victory in the 2008 election, adviser Rahm Emanuel quipped that “[y]ou never want a serious crisis to go to waste . . . [because it] provides the opportunity for us to do things that you could not do before.”27 Emanuel was correct: The situation in which the new Admini‐ stration found itself constituted an unusual political dynamic that, properly used, would have allowed the Obama Administration both to stimulate the economy and make it more productive over the long haul.
The Administration should have endorsed a stimulus package based on a repeal of the corporate income tax and reductions in employment taxes. This policy would have accomplished its stated goals, and the budgetary implications would have been less negative than those of the package ultimately adopted be‐ cause this alternative plan would have enhanced rather than de‐tracted from economic efficiency. This approach would also have been difficult for Republicans to oppose.
Yet the Administration did not take this approach, presuma‐ bly because its true goals were not just economic stimulus. Instead, the Administration wanted to reward its constituencies (unions, environmentalists, public education) and increase the size and scope of government. This tactic is consistent with the Administration’s policies in general. Across the board, it has taken a big government, redistributionist approach, whether regarding housing, unions, health, the auto industry, trade, anti‐ trust, or financial regulation. The Administration’s view appears to be that government is better than individuals at deciding how taxpayers get to spend their money and that government should engineer large transfers from richer to poorer.
Whether the Administration’s stimulus package will be successful is still to be determined. If the extra spending ends up being productive, then the impact of the stimulus might be positive on net. My own prediction, however, is that the programs adopted will generate large distortions and substantial waste, with minor stimulus impact. This is a pity because much better alternatives were available.
Read it all: The Case Against the Fiscal Stimulus.