The analysis of a Star Ledger editorial, alluded to in my previous article, will continue. Governor Christie is on the right track in trying to restore fiscal responsibility and a business friendly climate to a state which has experienced little of either in recent years. However well intentioned his efforts, progress at a local level can be frustrated by ill conceived ideas in Washington.
The Star Ledger writer argues that those who point out that stimulus efforts have not worked are ignoring the views of most economists that unemployment would have been even higher without the stimulus bills. How he derived the opinions of most economists is not revealed. But what is clear is that the writer is making an assumption favorable to his economic philosophy i.e. it would have been even worse. Yet the hard evidence shows the stimulus did not live up to its predictions. President Obama predicted the 2009 stimulus bill would keep unemployment around the 8% mark while it actually rose about 2 percentage points higher than that. Moreover government spending comes with costs other than the nearly trillion dollar price tag. Billions in financing were borrowed from other nations and billions more from sources within the United States. Domestic sources signify that money, that could have been used for other purposes, was directed for stimulus spending. Would those billions have been better invested in private enterprises or placed in the hands of consumers? We’ll never know the ‘could have beens’ but neither does the writer who argues things would have been worse. What we know is that the economy is very weak and a new tack is suggested.
Economist Joseph E. Stiglitz is quoted as stating that the next stimulus needs to be better designed. He argues it should be more focused on investment, education, infrastructure and technology. But education strategies are intrinsically long term. People are not educated quickly. The recession could be over long before educated students have an appreciable impact on the economy. There is a more fundamental problem with Stiglitz’s approach however. The question he should be answering is who decides how to direct funds and best stimulate the economy. What is the criteria used and the expertise of those making decisions? Will the rubber meets the road decisions be left to government bureaucrats working for the Department of Commerce? Why would government employees be better qualified to make economic decisions than people who actually run businesses falling within categories mentioned by Stiglitz?