Fiscal Stimulius Didn’t Work: Evidence

As I have said many times before the fiscal stimulus wouldn’t work. At best, it would boast consumer spending in the short-run but put us in debt the same amount. Of course what really happened was people didn’t spend hardly any of the money and they didn’t boast consumer spending. Since we either had to borrow or print the money, it is really going to increase future taxes to pay down debt.

Martin Feldstein who used to support the fiscal stimulus wrote in the Wall Street Journal the truth consequences of this “tax rebate.”:

“The evidence is now in and that optimism was unwarranted. Recent government statistics show that only between 10% and 20% of the rebate dollars were spent. The rebates added nearly $80 billion to the permanent national debt but less than $20 billion to consumer spending. This experience confirms earlier studies showing that one-time tax rebates are not a cost-effective way to increase economic activity.”

He also goes on to bash Obama’s plan to pay lower and middle income folks 1,000 dollars as a rebate:

“These conclusions are significant for evaluating the likely impact of Barack Obama’s recent proposal to distribute $1,000 rebate checks to low- and middle-income workers at an estimated cost of approximately $65 billion. His plan, to finance those rebates with an extra tax on oil companies, would reduce investment in refining and exploration, keeping oil prices higher than they would otherwise be.”

There you have it folks, the fiscal stimulus doesn’t work. Not like most economist knew this before hand but sometimes it feels good to say “I told you so.”

Here is my post that says “I told you so.”

And here is the article from the Wall Street Journal.

Update: Wal-Mart has also came out and signaled the stimulus didn’t work here.

“The boost to US retailers from about $100bn of tax rebate cheques has proved short-lived, with leading chains on Thursday reporting sluggish or falling sales in July, while Wal-Mart warned of slowing sales ahead.”


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2 CommentsLeave a comment

  1. Oh, Thanks! Really funny. Greets.

  2. Oh, Thanks! Really interesting. Greets.

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