The failure of the stimulus package to create jobs and generate economic growth becomes more apparent each day – despite preposterous claims from the White House about all the jobs they say it has created and saved. Counter intuitively (at least in the sane world outside of Washington), the stimulus’ failure increases the risk that Congress will try to pass another stimulus package based on their perceived need to “do something” to help the still-ailing economy.
If Congress constructs the next stimulus the same way it did the last – jam packed with pork barrel spending projects favored by liberals – it will fail as miserably as the first did to create jobs and stir economic activity. That is because government spending cannot create economic growth. More government spending, whether financed by taxes or borrowing, only takes money from one sector of the economy and transfers it to another. The government creates no new spending power when it redistributes money so it creates no new economic growth.
As the Heritage Foundation has pointed out, a stimulus package that lowered marginal tax rates instead of spending massive amounts of future generation’s wealth would actually create jobs and help pull the economy out of the Great Recession. That is because lower marginal tax rates would increase the incentives of people and businesses to work, save and invest – the very ingredients needed to create economic activity.
In addition to their findings that tax cuts are better at promoting economic growth, Alesina and Ardagna found that spending-based stimuli are actually associated with lower economic growth rates.
The real-world and academic evidence is clear that government spending-based fiscal stimulus does not work. Congress should heed the findings of this important new study, and the proof right before its eyes, that spending more money does nothing to help the economy. It should come to this realization before it embarks on another stimulus package predicated on more spending instead of marginal tax rate cuts.
Yep, that's what real conservatives have been saying since before Bush tried the first stimulus package last summer. Too bad no one in Washington has been listening.
There's my two cents.
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