Not Used

clipped from www.powerlineblog.com This afternoon, I heard John Cogan of the Hoover Institution present a persuasive analysis of why the Democratic spending legislation (and in particular the House version) will not appreciably stimulate the economy any time soon. Cogan proceed from the assumption, unassailable I think, that the way government policy can help stimulate the economy is by causing unproductive resources (e.g., a worker or inventory) to be put into productive use. By and large, the House stimulus package does not meet this test, especially during the time period when we're likely to be in the current recession. According to Cogan, about 20 percent of the package consists of temporary tax cuts. These didn't work when we tried them a year ago and aren't likely to work now. The reason is that, in bad economic times, people tend not to spend money they receive on a one-time basis. Cogan presented charts showing how small an effect on consumption the 2008 tax rebates had.