Monday, December 15, 2008

Bigger Government Is Not Stimulus

Here’s another video from my friend and senior fellow at the Cato Institute, Dan Mitchell – one that is particularly timely – on Keynesian “stimulus” proposals.

Dan notes in his email to me, “With Reuters reporting that Obama may propose as much as $1 trillion (yes, trillion) of new spending, which would be in addition to the huge expansion of government under Bush, there is a desperate need for more education on this issue."

Amen to that.

As I recently wrote, government cannot spend our way into prosperity. What we need is a revival of the dormant animal spirits. They have been beaten down by a brutal bear market in stocks, the ongoing housing slump, and all the myriad blockages to credit availability. A bunch of new spending won’t do the trick. Lower tax rates will.

In other words, government policy must make it clear that new successes will be handsomely rewarded.