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Stimulus Doesn't Work


Retired USAF Chief
Apr 8, 2011
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San Antonio, TX
There is an op-ed in today's WSJ by John F. Cogan and John B. Taylor about past stimulus plans and they have not worked. However well-intentioned, you always get a temporary boost followed by a slump when the money runs out. Consider:

In 1974-75, Gerald Ford comes into office in the midst of a serious recession. So, he tries a temporary tax rebate and Congress adds a $50 increase in Social Security benefits, and a one time tax credit for new home buyers. Result: a temporary boost in GDP to 9% inthe 1st qtr of 1976, followed by a drop down to 2% in the 3rd qtr of that year and UE started going back up. Congress passes a 2nd stimulus in July 1976 over Ford's veto, designed to prevent layoffs to state and local employees and tax increases. Didn't work, and we ended up with Jimmy Carter and more incumbent senators lost their seats than in any election in 20 years.

So Carter comes in, what does he do? Right, another stimulus, "to restore consumer confidence and consumer purchasing power". We get another tax rebate and more Social Security bonus payments, federal public infrastructure grants, and aid to state and local gov'ts. And he added a tax credit to small and medium sized companies to hire new workers. Man, does this sound familiar. Congress enacted the plan in May 1977; the resulting recovery was not sustained and the economy went into recession in 1980. Carter lost his re-election, the Senate passed into republican control, and 33 House dems lost their seats.

Enter Reagan. None of the stimulus crap for him, he enacts permanent tax cuts in conjunction with a steady monetary policy by Paul Volcker, and the boom was on. Nearly 2 decades of strong, steady non-inflationary growth.

Bill Clinton proposed a 16 billion stimulus bill in his 1st year, got rejected by Congress. A dem-controlled Congress who instead went with cutting the growth in spending and raising taxes.

Bush43 comes into office, just in time for another recession. He tried to get a broadbased permanent reduction in tax rates, but with a weakening economy a temporary tax rebate is added to the bill. You guessed it, the tax rebate doesn't work, maybe partly due to 9/11. In 2003 Bush gets his well-known by now tax cuts, and the economy picks up thereafter, with good growth and low UE all the way to the debacle in late 2007-2008. Bush tried another tax rebate in 2008, doesn't work then either.

Now comes Obama and the democrats. What do they do? Yep, anorther stimulus to the tune of approx 800 billion. Pretty much like what Carter tried back in the mid 70s, and so far not a lot of positive results. One can argue things would've been worse without it, but one can also argue the whole deal was poorly designed and executed.

And now we've got the latest stimulus, by another name this time: Obama's jobs bill. Anyone with an ounce of sense realizes this is not going to help unemployment for at least 2 or 3 years, if ever. Certainly past history does not indicate otherwise. How does one continually try failed policies that add to our debt and leave us no better off?
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