There’s little argument that the $800 billion-plus stimulus bill that was President Barack Obama’s first “accomplishment” soon became one of his biggest political liabilities. The recovery that began in mid-2009 has been the weakest since World War II in terms of GDP growth and nearly the weakest in terms of job growth.
An explosion of government spending didn’t do much to stimulate the economy, yet liberal economists keep popping up, demanding more stimulus.
Last week, Peter Orszag — Obama’s first budget chief — was out with a piece saying, in effect, ignore all that debt piling up, just shovel more money out the door. Orszag says, “Those who are most worried about our long-term fiscal health shouldn’t fret too much about additional stimulus today, if it is combined with future budget cuts.” In other words, trust Congress to cough up the cuts later.
Yet the Obama stimulus has become a potent rebuttal to Keynesian economics — the notion that you prime the economic pump by boosting government spending.
I wonder if Orszag ever read that paper that came out last year by a couple of academic economists, Timothy Conley of the University of Western Ontario and Bill Dupor of Ohio State. They looked at the progress of the stimulus up to that point and found that it created or “saved” a measly 450,000 jobs — while killing or forestalling more than a million.
Much of the stimulus money was trundled off to state governments, where in many cases it didn’t result in increased spending. Instead, states used federal dollars to replace spending they had planned anyway.
Which makes you wonder: What if the entire amount of the stimulus had been plowed into permanent tax cuts instead?
There’s no way of knowing with precision, but you’d be safe in assuming that the economy would be significantly larger, that more people would be working and paying taxes, that the deficit would be smaller and we wouldn’t have piled up quite so much debt.
Crazy? Not really. Tax cuts — combined with spending cuts — helped revive Sweden’s economy and stabilize its government finances, beginning a half-dozen years ago.
Sweden was once the exemplar of the overspending welfare state, but last year its economy grew at a 4.4 percent clip, and its deficit vanished. As the London-based Spectator magazine noted in a recent article, when the panic hit in ‘08 and everyone was screaming that stimulus spending was essential, Sweden stuck with its policy of supply-side tax cuts.
The program was developed by Anders Borg, a libertarian economist known for his ponytail and earring.
“Look at Spain, Portugal or the UK, whose governments were arguing for large temporary stimulus,” he told Spectator magazine. “Well, we can see that very little of the stimulus went to the economy. But they are stuck with the debt.”
Sound familiar? Borg’s perspective is bracing stuff, given the staleness of the political debate in this country, where one of our major parties has poisoned itself with wealth hatred and our president has become obsessed with “fat cats” and millionaire jet owners.
Borg doesn’t loathe entrepreneurs. He wants more of them. So he scrapped a wealth tax and most property taxes, moves that were controversial and caused his party to lose support. But Borg says economic recovery begins with entrepreneurs and “ownership is a factor of production.” If you want the production and jobs, you have to draw the owners.
At the same time, Sweden cut taxes for lower-income brackets as well and unlike the Bush administration, it insisted on deep spending cuts along with the tax cuts.
While some people would tag any policy mix involving spending cuts as “austerity,” it seems to have worked effectively in Sweden, and there’s little reason to assume the same prescription wouldn’t help our own ailing economy.
If you want jobs and prosperity, a big part of the solution is to curb the growth of government and encourage entrepreneurs — rather than threaten them with higher taxes if they succeed.
• McClanahan is a member of the Kansas City Star editorial board.
Comments (30)
Add commentGranted
Sweden has their act together in a lot of ways.
They have the best healthcare system in the world - funded by the government. They have a big focus on renewable energy. They also haven't engaged in a bunch of foreign wars, draining their coffers.
Sweden also didn't bail out its failed banks during the crisis. Instead, they liquidated them and sold them off. This was a huge benefit to the taxpayers and reduced their national debt.
Sweden has the highest tax rate in the world, including a nationwide value added (sales) tax of 25%, so they have lots of room to reduce taxes. The U.S. has one of the lowest rates in the developed world.
But I'm not opposed to a short-term tax reduction. Do it for the poor, middle class, and small businesses only - they're the ones that need more cash in their pockets. Big businesses and the wealthy are sitting on mountains of cash - they're just not investing it because demand for their products is down. Reducing their taxes might sweeten their profits, but it won't stimulate our economy.
Raise taxes on the big guys to offset the cost of the tax cuts for the little guys.
So?
I wonder what party the author is. A republican, democrat, or does he think for himself? I just find it amusing when I see republican's complaining about the democrats. It's all one party. All the same people controlling the purse strings. All the same people controlling what you see on tv and read in the papers.
If you actually vote for either a democrat or a republican, I don't ever want to hear you complain about Obama or Romney. Any person that hasn't realized this is one party using petty arguments to fulfill agendas which control both parties never actually learned how to think for themselves.
I'm not saying that if you believe in what these parties are doing you shouldn't vote for them. Just keep in mind, you can't hate Obama for his government policy and like Romney's. And vice-versa, you can't hate Romney's government policy and like Obama's. If you do, you're just liking to like and hating to hate as thier policy is one in the same.
An honorable person will do what they know is right despite the odds.
All the parties do is toss candidates back and forth and share supreme power knowing the US citizens are too stupid to realize it. Pitiful. They know if Obama gets re-elected, a republican will be in office in four years. They know that if Romney gets elected, a democrat will be in office in between four and eight years. This means either party can do whatever they want and it's the American people that get screwed in the end.
In this coming election, please, don't be a tool.
You're close, Wren
The two parties are just the puppets you see on the stage. The question you really want to be asking is, who's manipulating those strings?
A conservative infant's first words...
...must be...
"tax cuts!"
They regurgitate those two words over and over and over again. To conservatives, they are more precious than "I love you" or "your house is on fire" or "our stock split."
And when conservatives kick and scream and get the tax cuts they want, they want more tax cuts.
To conservatives, tax cuts cure everything from debt to hemorrhoids to cancer. It is their answer to everything! Everything can be fixed with more tax cuts!
But they never stop to wonder how roads and schools will get built without taxes. All they know is that they want (not need) more tax cuts.
Unfortunately, I feel that tax cuts should only go to those who need it. Rich people and huge corporations don't need tax cuts. Poor people and middle class people need tax cuts.
Sweden's success
Or, Sweden's success could be attributed to the fact that they are socialist.
@Jo
You hit the nail on the head!
tax cuts are the panacea to conservatives just like "spend it!" is the answer to the liberals. That's why time and again I find myself going to the polls to void out YOUR vote. It's a duty, a compulsion, but nothing personal.
Sweden is not ...
socialist. It is a parliamentary democracy based on a free-market economy. The government heavily subsidizes certain services through an aggressive progressive tax system, which can be argued are aspects of socialism.
The reason it works for Sweden is primarily because it is a small homogenous population. Conversely, this is why Swedish or European style government initiatives would be very problematic in the US. We are not small and more importantly we are very diverse. Also, one of our basic historical tenets is mistrust of central government, which exacerbated by our diversity.
...
By exploiting the workers! By 'anging on to outdated imperialist dogma which perpetuates the economic and social differences in our society. If there's ever going to be any progress with the--
We're an anarcho-syndicalist commune. We take it in turns to act as a sort of executive officer for the week. But all the decision of that officer have to be ratified at a special bi-weekly meeting-- By a simple majority in the case of purely internal affairs,-- But by a two-thirds majority in the case of more major--
Well, but you can't expect to wield supreme executive power just 'cause some watery tart threw a sword at you!
agreed, Wren
Government is derived from the mandate of the masses -- not some farcical aquatic ceremony.
1/3 of the stimulus was tax cuts
1/3 of the stimulus was tax cuts. we have been cutting taxes for 30 some odd years.
When will they start working for the middle class and not just the rich?
I thought
we were an autonomous collective....
More about Sweden....
The GDP of Sweden is about 538 billion USD. Our stimulus was larger than their entire economy. If they were a US state, they would rank between #6 Pennsylvania and #7 New Jersey.
Sweden's population is 9.4 million. If Sweden were a US State, they would fall between #10 North Carolina and #11 New Jersey in population.
Gov't stimulus does nothing
Gov't stimulus does nothing for the economy or promote any real growth. In real simple terms, its like taking a cash advance on your credit card to pay your kid to mow the lawn. Yeah, it puts money in your kid's pocket so he/she can buy stuff, but you've got to pay it back next month (or pay the minimum mo. payment which our gov't is doing).
Now I wonder...
..who the heck would "thumbs down" Monty Python and the Holy Grail??
I'll tell you who --
tiny-brained wipers of other persons' bottoms, I guess.
@dust
It's obviously the violence inherent to the [commenting] system.
Monty Python
@fromdustreturned: I got your Monty Python joke, and I gave you a thumbs up on it. Not sure why people clicked you down.
I saw a bumper sticker the other day: "Silly conservatives - Obama DID cut your taxes!"
Democrats want LOW taxes. Republicans want NO taxes. They feel government services arise from magic.
I would gladly pay more in taxes if it mean: Universal health care, better schools, more tourist traffic in Juneau, better roads, more police, etc.
Wow...
Stupidity is rampant. People actually seem to believe that if they vote republican you won't have a president pushing democrat stands and vice-versa. Wake up! Obama's using Romney's health care legislation, Obama's using Bush's bail-outs. It doesn't matter. You can either like what both parties are doing, or you don't.
If you like what the democrat/republican control mechanism is doing, great, I'm good with that. But don't complain if Romney gets elected and don't complain if Obama gets elected. If you vote for Romney and Obama gets elected I don't want to hear you say, "Well I didn't vote for him." It's the same person!
If I cared about people thumbing me down I wouldn't post on here. But thumbing down a Monte Python quote is just petty.
Jo
In response to the following:
Democrats want LOW taxes. Republicans want NO taxes. They feel government services arise from magic.
I would gladly pay more in taxes if it mean: Universal health care, better schools, more tourist traffic in Juneau, better roads, more police, etc.
Sounds pretty democratic. Why not let individual states decide on universal health care, increase the size of the State Department of Education and kick the feds out, lower federal taxes across the board and increase state/local taxes. I would be willing to pay just as much in taxes if I knew my money is staying in the community I live in. Use that money to increase tourism.
I guess I'm speaking that libertarian nonsense again...
...
...
Yep, libertarian nonsense.
Yep, libertarian nonsense. And false equivalence. For all the similarities in our two political parties, one of them is rabidly against giving certain groups equal rights and is decidedly for strengthening the status quo. The fact that you don't seem to realize this speaks to your privilege as a white male. Were you a woman, an ethnic minority, or homosexual, you'd see a pretty clear difference between Obama and Romney.
But go on. Keep screaming "they're all the same!" At least then we can reasonably assume the rest of your opinions are similarly ill-informed.
Keep up the Good Fight, 2P
I see superhero status in your future -- armed with a turlet plunger to keep offal from breaching the rim of justice, and a 2-ply roll of equality, that no bottom gets shorted its fair wipe, and of course a mask, so that all can identify you as Everyman, and not some creeper with self-esteem issues that feels compelled to latch onto faux causes.
PP
You obviously don't know a thing about the Libertarian party.
Libertarians believe government should stay out of people's lives. They believe in the Constitution. When it comes to minorities, the Constitution speaks for itself. When it comes to homosexuals and gay marriage, equal rights under the Constitution speaks for itself.
Gay marriage: Libertarians believe stay out of their lives and treat them equally. Anyone even remotely educated on the topic of marriage knows that marriage was originally brought to keep minorities from marrying whites. Loving vs. Virginia the US Supreme Court ruled states couldn't keep minorities from marrying. Maybe they should have ruled marriage is between you and your God and your family and government should butt out of who your shacking up with.
PP, you are dogging me for preaching Libertarianism when really, Libertarianism is more for equal rights than Obama, Bush, the other Bush, Clinton and Romney combined. They strive to take rights away from people and never do anything to fix the problem. Stay out of other people's lives, plain and simple.
And yes, democrats and republicans are all the same. Maybe one day you will grow up and realize it.
government bailouts ='s both parties
health care ='s both parties
higher taxes ='s both parties
more government control ='s both parties
foreign wars ='s both parties
Guantanamo Bay ='s both parties
stepping on states' rights ='s both parties
stepping on personal freedom ='s both parties
not fixing our borders and immigration laws ='s both parties
government spending ='s both parties
HR 1540 making US citizens criminals ='s both parties
HR 347 making protesting illegal ='s both parties
What is it gonna take to think for yourself? Are you just that ignorant?
Parties
I think the differences between the parties are pretty profound.
For instance, the Exxon Party wants no government regulations but lots of free government resources.
The AFL-CIO Party wants lots of government meddling.
The Goldman Sachs Party wants no government meddling but lots of bailouts.
The Lockheed Martin Party is hawkish on national security.
It's gonna be one rip-roaring election season. Can't wait!
Agreed Latitude!
As far as I'm concerned the republican party is dead as we know it. The press refuses to talk about Ron Paul, yet he is dominating all the conventions. The GOP keeps doing things completely stupid like not following their own rules, having security arrest those who contest or call a point of order. In Louisiana the majority supported RP and called for a new chair, which is allowed with a simple vote. He failed to recognize them. They turned their chairs around to conduct the meeting to the back of the room which was in their rights to do. The man they elected the GOP had escorted out by security. There are videos of the man on youtube telling them he has an artificial hip, then they drop him. He went to the hospital. Security broke another RP supporters fingers.
There are videos all over youtube that you can watch and see whether it's the GOP or RP supporters for yourself. It's insane how corrupt the GOP is! Can't even play by their own rules!
To all you liberals posting
To all you liberals posting on this article..."Yeah, you betcha."
@dennyh
To all you reactionaries posting on this article: "All of them. ;)"
@wren: I love social
@wren: I love social libertarianism--don't get me wrong. But if libertarian organizations' actions are any indication, it comes secondary to economic libertarianism--the kind of political philosophy that requires free market fairies and a healthy dose of historical revisionism (no, man, children LOVED working in factories!) to make it viable. And libertarians emphasize the economic aspect over the social aspect. I don't see the Cato Institute or any other libertarian organizations actively promoting gay marriage, or the repeal of DADT, or tougher environmental laws to prevent fracking from ruining MY property, and so on. Hell, Ron Paul even said he would not have voted for the Civil Rights Act.
Libertarians think every person exists in a vacuum. Most of us realized this wasn't so when we turned 12 or 13.
It's about time
It's way past time that we "take a cue" from someone, cause we sure dont seem to know what the heck we're doing!!!
I would "thumbs down" Monty Python and the Holy Grail,
and for thinking own my own, and not going along with some
peoples opinions, I would then become a "tiny-brained wipers
of other persons' bottoms"...now...how cool is that!!
The problem with libertarians...
...is that they are only libertarian about THEIR rights. If you are doing something that p!sses them off, then they will get right up in your stuff.