Sunday, December 21, 2008

Tax cuts vs. govt. spending

I have blogged about the broken window fallacy of government spending, as a theoretical matter. Now we get some practical advice on the difficulties of ramping up spending.
... existing agencies are working full time administering the budgets they have. They can't just add a zero at the end of each contract and be done with it.

Stop looking at models and equations and theoretical constructs for a while and look at the practical considerations of the stimulus package. I've been doing this sort of thing for quite a while and I'm convinced it's doomed from the start. If they feel the need to blast a trillion dollars into confetti, then tax cuts would make the most sense. Even if the public used the money to pay down debt, that would be a good thing as it would transfer the debt burden from the consumer to the government making the consumer feel a little bit like spending again.
Score one for tax cuts.

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