Sunday, January 25, 2009

Stimulus and Government

John Phipps has a long post, arguing for stimulus investment in infrastructure as opposed to tax cuts. It's worth reading. Two points he misses, though:
  • government spending on infrastructure is highly visible. We can see how FSA spends its millions, and thus judge whether or not it spends them wisely or not, or even spends them timely. We can't similarly see the ways in which tax cuts are used.
  • there's the assumption that government will be more stupid in its spending than the private sector. Again, because of the difference in visibility, the assumption can't be proved. Suppose a tax cut goes mostly to personal consumption spending, meals out, bigger cars, bigger houses, more vacations, more luxuries. My Calvinistic forebears shout from their graves that's wasteful, not productive.

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