Why You Can’t Stimulate Your Way to Prosperity > Why You Can’t Stimulate Your Way to Prosperity

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Why You Can’t Stimulate Your Way to Prosperity

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Why You Can’t Stimulate Your Way to Prosperity

From John Maynard Keynes to the Kennedy Tax Cut Revolution

#1: Do prefer tax cuts to government expenditure programs

#2: Don’t rely on government expenditure programs with long spend-outs

#3: Don’t try to disguise permanent government expenditure programs as temporary fiscal stimulus

#4: Do favor permanent tax cuts over temporary ones

#5: Do focus primarily on stimulating business investment if the goal is both short-term stimulus and longer-term growth

#6: Do favor federal government transfer programs to meet the tests of timeliness and proper targeting

#7: Do provide cash-strapped state governments with transfer payments that will help them finance their unemployment benefits programs and allow them to void contractionary cutbacks in spending and layoffs—but beware moral hazard

#8: Don’t be Robin Hood or Huey Long in targeting a stimulus package

#9: Don’t use a fiscal stimulus to fix a recession triggered by a financial crisis

#10: Do let automatic stabilizers do their jobs

#11: Don’t make a long-term structural economic problem worse by implementing a poorly crafted, short-term, countercyclical, fiscal stimulus

Endnotes

FTPress Delivers Elements

Why You Can’t Stimulate Your Way to Prosperity

Glenn Hubbard and Peter Navarro

Throughout 2008, Larry Summers, the Harvard economist, built the case for a big but surgical stimulus package. [However,] the stimulus approach that has emerged on Capitol Hill abandoned the Summers parameters.

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