August 3, 2009

TIM CAVANAUGH RESPONDS TO JAMES SUROWIECKI: “We have now seen 18 months of Federal supports, bailouts, loans, nationalizations, used-car purchases and other forms of spending-based stimulus, yet GDP in this period has declined nearly 2 percent. Nevertheless I’ll accept for the sake of argument the Keynesian assumption that countercyclical spending actually strengthens the economy. (Keynesians can always argue that things would have been worse if the government had done nothing.) . . . The difference between Federal and state spending isn’t ideological but structural: Washington D.C. can create its own money; Topeka can’t. If you want states to spend as drunkenly as the Federal government, just give them the power to coin money and emit bills of credit. “

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