Of course, as a liberal, he believes that, and he's going to continue to say it. But conservatives better get their heads straight on this. The evidence is clear that neither one-time demand-side tax rebates nor Keynesian-type government spending generates economic growth.
The 2008 stimulus bill, which included more than $100 billion in tax rebates on the assumption that people would spend the money immediately, did not work to boost the economy.
People spent less than 16 percent of the rebate money, and no appreciable "jolt" to the economy occurred. That's mainly because these one-time rebates are temporary, and people generally don't increase their spending unless they anticipate or receive a permanent increase in their disposable incomes, such as through salary increases or reductions in their marginal tax rates.
Similarly, policy analyst Brian Riedl, writing for The Heritage Foundation, documents that big-government spending packages, such as that being planned by Obama, almost never work. None of the massive spending hikes tried in the 1930s, 1960s or 1970s worked to stimulate growth. "Yet in the 1980s and 1990s -- when the federal government shrank by one-fifth as a percentage of gross domestic product (GDP) -- the U.S. economy enjoyed its greatest expansion to date."
But Keynesian-type government spending fails to stimulate the economy because it just substitutes one type of spending (government) for another (private-sector). In fact, such spending plans usually produce the negative effect of reducing incentives to produce because they subsidize leisure and unemployment and they are often funded out of growth-zapping tax increases. The government expenditures also tend to reduce production because they are in place of more efficient private-sector spending.
It's too bad that under President Bush, Republicans have been selling supply-side theory with demand-side (consumption-based) arguments. For conservatives to get back in the game and, more immediately, have any impact in blocking Obama's disastrous and reckless stimulus packages and further bailouts, they must relearn, articulate and sell supply-side theory in the spirit of Ronald Reagan and Jack Kemp.
Otherwise, we not only will cede the tax-and-spend issue to Obama Democrats but also will be complicit in the disastrous fiscal policies that will ensue.
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