Arthur Laffer: The Real 'Stimulus' Record

Although this WSJ op ed piece from Art Laffer is from August I find it valuable at this point in time during the fiscal cliff discussions as President Obama has laid out a new proposal which calls for increased stimulus.  As Mr. Laffer points out along with a strong contingent of data points, additional stimulus is not what is needed and would likely do more harm than good.

The major issue facing developed nations as well as emerging markets is lack of demand.  Demand as it has been shown, can not be generated by ultra low or even in some cases just giving money away.

Full piece here

• Federal government spending as a share of GDP rose to a high of 27.3% in 2009 from 21.4% in late 2007. This increase is virtually all stimulus spending, including add-ons to the agricultural and housing bills in 2007, the $600 per capita tax rebate in 2008, the TARP and Fannie Mae and Freddie Mac bailouts, "cash for clunkers," additional mortgage relief subsidies and, of course, President Obama's $860 billion stimulus plan that promised to deliver unemployment rates below 6% by now. Stimulus spending over the past five years totaled more than $4 trillion.
• .....In essence, it's when government takes additional resources beyond what it would otherwise take from one group of people (usually the people who produced the resources) and then gives those resources to another group of people (often to non-workers and non-producers).

• Well, the truth is that government spending does come with debits. For every additional government dollar spent there is an additional private dollar taken. All the stimulus to the spending recipients is matched on a dollar-for-dollar basis every minute of every day by a depressant placed on the people who pay for these transfers. Or as a student of the dismal science might say, the total income effects of additional government spending always sum to zero.