Francis Cianfrocca explains why the Pork Package won’t work, to Paul Krugman and President Obama:
It will perform far below expectation. On top of that, its effects will not stimulate the economy in any permanent way, but will rather dissipate as soon as the stimulus does.
The standard argument against cutting or abating taxes as a tool of countercyclical policy, is that people will save rather than spend the money. Keynesianism targets current-period GDP as the measurement that matters above all, so saving more in a recession is a Bad Thing.
But the people don’t want higher GDP. They want stronger balance sheets, amid a sense that hard times are ahead. If anything, the stimulus debate has exacerbated this sense. Why? Because the people want to save more money, but they see their elected leaders proposing to borrow and spend more, and they think: “these people have no idea what’s really going on.”
Exactly. Re-read the first two sentences of that last paragraph. That‘s the mood of the country, and for good reason — our balance sheet is entirely out of whack.
First, we had a Republican Congress that spent like Democrats. Then we had a Democratic Congress that spent like Republicans always claimed Democrats spent. Now we have an entirely-Democratic government on a spending-bender the likes of which has never been seen in human history.
Unfortunately, that’s no exaggeration.
These days, cash is king — and our leadership would rather depose it than give it the respect it deserves.