Crews stimulus paper featured in New York Times
The New York Times today focuses on economic stimulus in its “Times Topics” section — and CEI’s Wayne Crews’s recent paper was at the top of the Times’ list of recommended readings on stimulus packages.
Titled “Still Stimulating Like its 1999: Time to Rethink Bipartisan Collusion on Economic Stimulus Packages,” the Issue Analysis points to the problems with government intervention in the economy and the potential economic harm such policies can cause:
As in recent stimulus campaigns—for example, during the first terms of presidents Bill Clinton and George W. Bush—politicians almost uniformly accept the legitimacy of government stimulus and rarely ponder the future economic harm such intervention may cause. Genuine stimulus would entail liberalization of the economy from excessive regulations, interventions, and spending, and from political inflation of the money supply. It would maintain the conditions—legal order, minimal regulations, and stable institutions—within which wealth can be created while recognizing that governments do not themselves create wealth.
“Say’s Law” in economics holds that supply creates its own demand. A relative overproduction of certain goods may occur, implying that too many scarce inputs have gone into the production of unwanted items relative to inputs for desired goods. But general overproduction—to which demand stimulus would allegedly provide relief—is not the core economic problem.
Wayne points to ways the government can help — by freeing up economic activity from high tax rates and regulations that stifle economic growth:
One immediate form of “stimulus” is to cut marginal tax rates to facilitate economic activity via increased supply. With returns to enterprise increased and workers and investors certain that present efforts will be penalized less, the economy will begin expanding owing to reduced effective tariffs on the creation of supply. Similarly, a sustained program of reducing governmental regulatory interventions in the economy, and invigorating institutions to keep such interventions minimal, point the way toward prosperity and wealth creation, and to an economy that can finally eschew damaging appeals to political stimulus.