Thompson would wait on economic stimulus

Thompson would wait on economic stimulus – Yahoo! News

More seriously, he said he was not ready to embrace a stimulus package.

“We’re all concerned about the direction of the economy,” said the former Tennessee senator. “We’ve had a good run, but we can’t take growth for granted.” He said “we’ve got to have a potential stimulus package on the table to be discussed if it would make sense to be used in short order, but we’re not quite there yet.”

And doing nothing might leave the economy stronger, he said.

“There’s a case to be made for that,” he said. “And it just requires strong heads at the table and not snap judgments, you know, by politicians on the road trying to think of something smart to say in 30 seconds.”

Every time I read something about Fred Thompson I like him more. While the rest of the political world is running around outbidding each other in the size of the stimulus they want to provide (Hillary bid $70 billion then Obama bid $75. Or maybe I have that backwards, it’s not like it matters. And apparently Bush is pushing for a $150 billion package. Geez.) Thompson is alone in recognizing that all of this is pointless, and possibly harmful if we do it the wrong way. A few reasons why none of these proposals will likely do any good:

1) They’re just passing money around, not creating new wealth: all these proposal are doing is taking money from column A and putting it into Column B. That’s not a stimulus, that’s redecorating. The money will either come from borrowing money (which means the government will be crowding out others from the bond market), new taxes (which will be robbing Peter to pay Paul in the truest sense of that phrase), or the worst case scenario, creating new money, thereby adding to inflation and decreasing the value of the money we already have.)
2) Most estimates put this at a short and shallow recession, if one occurs at all. Given the slowness of the political process and the federal bureaucracy, by the time this whole process plays out the recession may be over, if it ever happens at all.
3) If you really want to help the economy, don’t do it with a short-term outlook, do something that will help for a long time: cut taxes permanently. Businesses aren’t going to increase their hiring or output based on a short-term policy change: that would bind them to a higher staffing level in the long term for a short-term gain. So, do something that will give them the confidence that this change will last: cut their taxes, remove regulatory impediment. If businesses see that any gain in production will be short-lived, they’ll just get through it with increased overtime or temporary workers. If we want a more lasting increase in employment, we need to give them a reason to do so. So them some reason to believe that government will get out of their way for an extended period of time.

I’ve long felt that Thompson was the only candidate in the race with a pair, but now it seems he’s the only one with a brain too.

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One thought on “Thompson would wait on economic stimulus

  1. We’ve tried tax rebates before. They don’t work.

    Feel-Good Economics – WSJ.com One dissenter was economist Milton Friedman. His research had led him to conclude that consumer spending was less a function of liquidity than something he called “permanent income.” Friedman observed that when workers los…

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