Perspective - An Unstimulating Idea by Sheldon Richman

[Stephane Budge]

It’s like taking a bucket of water from the deep end of a pool and
dumping it into the shallow end.”

That’s how George Mason University economist Russell Roberts describes
the logic—rather, illogic—of the economic “stimulus” proposals that
everyone and his uncle have been proposing.

If we needed further demonstration of the folly that is the American
political-economic system, there it is. The leaders of the
interventionist state and the candidates who aspire to command it will
continue to produce this inanity until people see it for the
balderdash it is and resoundingly reject it.

The problem is that most people don’t see it for what it is. When told
economic activity is slowing down, they demand that their “leaders”
and candidates assure them there is a Plan to keep them safe. The
politicians are more than happy to oblige. Details don’t matter much.

The economic-stimulus theory is plainly incoherent. Besides the
swimming-pool analogy already quoted, Russell Roberts showed the
futility of what’s being proposed in another vivid way. Noting that
politicians love to talk about “injecting” money into the economy,
like a doctor giving a patient a transfusion, Roberts writes, “But
where does the economic injection come from? It has to come from
inside the system. It’s not an outside stimulus like . . . the
transfusion. It means taking money from someone or somewhere inside
the system and giving it to someone else.”

If the government uses fiscal means to goose the economy, the money
has to come from somewhere. The politicians do not propose to cut
spending—quite the contrary. So, since the budget is already in
deficit, any tax “rebates” and new government spending will have to
come from borrowing. But government debt doesn’t create wealth; it
only transfers it. The lenders won’t be able to spend or invest the
money. And the new debt will have to be repaid with interest through
taxation in the future, suppressing economic activity then. Likewise,
if taxes are raised to provide the stimulus—well, you can finish the
thought.

If the government increases some people’s ability to spend by
decreasing other people’s ability to spend, where’s the stimulus?
Maybe these measures aren’t really intended to stimulate anything but
a candidate’s popularity with appropriate constituencies. The
underlying rationale for stimulus is that consumption is insufficient.
While the purpose of production is indeed consumption, it doesn’t
follow that the government can create economic growth by stimulating
consumption. You can’t consume what hasn’t been produced.

Thus giving people money and urging them to spend it won’t improve
their economic prospects. As usual, what looks like a political favor
to low-income people is just a cruel hoax. Their well-being depends on
genuine and sustained economic growth, which would maximize job
opportunities and lower prices. But that requires a radical freeing of
the economy—which politicians are not wont to favor.

The most objectionable side of the stimulus frenzy is the assumption
that government can and should run the economy. The reports of the
death of Keynesianism were apparently exaggerated. Most people still
believe the economy is a vehicle and the government the driver,
precisely adjusting the gas pedal and brake as needed. But really
there is no “economy.” There are only people pursuing ends and the
property they use and exchange in the process. If the government tries
to “run the economy” it has to run us. It is a dangerous mistake to
think the would-be driver can know what he’s doing. He can’t possibly
know. The system is too complex, the necessary information—much of
which is never articulated—scattered too far and wide. In contrast,
the market process solves the problem of how to coordinate the
productive activities of countless people in order to satisfy
consumers.

Those who are biased against freedom will proclaim that our economic
problems show that the free market has failed. What free market? Do
they mean the “free” market that for ages and in myriad ways the
government has straitjacketed and skewed on behalf of favored
interests?

We are in our present position because government has burdened us with
taxes, spending, debt, regulations, subsidies, guarantees (to banks,
for example), trade restrictions, fiat money, and other impositions.
Between the endless domestic schemes and war, we are being crushed by
the weight of the state. We don’t need a stimulus. We need the weight
lifted. We need freedom.