Reader comments
In our opinion: The stimulus myth

Lew Jeppson | 12:28 a.m. Oct. 17, 2009

Hogwash! You are talking about the so-called crowding out effect which has it that public expenditures replace private, in effect crowding them out. But in recession when there are idle resources there can be no crowding out effect. Our recession would be much worse and the eventual losses much greater without stimulus. This is not to say that there are no risks. When the economy heats up Federal debt could be a drag, but we'll cross that possibility (by no means certain) when we come to it.

The Keynesian multiplier is well understood and accepted in the economics discipline. The economy is dynamic, not static. Stimulus now is preventing collapse later. We came perilously close to another Great Depression. But then, you opposed the New Deal just as you oppose Obama's stimulus package now. You can't seem to learn.

This is not to say that the economics discipline has it all figured out - it doesn't. The great gray area is the one between the Feds and the banks. That is were the risk is, not with the Keynesian multiplier, which theory was also developed by Utahn Marriner S. Eccles.

When? | 1:30 a.m. Oct. 17, 2009

When will Americans hold the Democrats accountable for this "stimulus" debacle which has proven to be the largest finanical scam in the history of the world? Imagine the outcry for the left if it were the Republicans doing this!

Roland Kayser | 1:46 a.m. Oct. 17, 2009

Keynes would have taught us to cut taxes and increase spending during bad times, to avoid a depression. He also thought we should raise taxes and cut spending during good times, to avoid inflation. Had we followed this advice from 2003-2007, the housing bubble would never have formed.
Of course the one problem with his theory is that while tax cuts and spending increases are always popular, tax increases and spending cuts are always unpopular, and no political leader seems to have the courage to jeopardize his or her political carreer in order to practice sound economics.

Comments continue below

Other countries ... | 2:41 a.m. Oct. 17, 2009

that did not go overboard with such huge economic stimuli like the US did are already farther along in their recovery, showing lower unemployment rates while we continue to languish. The worse is yet to come when the huge deficits and the resulting devalued dollar sets off a period of high inflation.

Taxes paid by workers | 6:10 a.m. Oct. 17, 2009

When people work, they pay taxes. Those taxes go to both local, state, and federal levels. It is in the government's best interest to have people working so that government coffers can grow.

How the stimulus works is that it creates jobs for specific projects. The ripple effect of indirect and induced effects can be quite massive. As jobs are created and as goods are purchased from that effect, taxes are paid.

Keynesian economics is what is being practiced now and so far, it seems to be working with the economy steadily turning around, and not all the stimulus has been invested yet.

Why Keynesian stimulus is better than Bush's tax cuts is because the stimulus was focused on specific projects geared for kickstarting the economy (e.g., construction, roads, public works, etc.). The Bush tax cuts were too randomized where people spent them on things like Chinese TVs or Mideast oil, so the economic rewards didn't create the domestic ripple effect. Strategic spending is always better than random tax cuts where there's no control over where money flows.

Doug Slater | 6:38 a.m. Oct. 17, 2009

Mr Jeppson fails to acknowledge that Government created the problems in the first place and without correcting those, the situation will only get worse with their "band aid" Kenesian solutions. Government doesn't have to do things efficiently..they only "do something" to get re-elected.
Were we to abolish the Federal Reserve System, we could curb excesses by Government and return to a more equitable market economy where the difference between success and failure depends on the efficiency and motivation of the people involved.

Anonymous | 7:07 a.m. Oct. 17, 2009

I'm not really sure what your point is here. You say the stimulus benefits are unprovable, yet you extol those possible benefits. It seems like you have a foot on both sides of the argument. Not very useful, is it? No one will argue that the stimulus was intended to be nor is the end all solution to the economic disaster we experienced. In fact, the majority of the money has not yet been spent. But is has contributed to recovery and will continue to do so. Part of a good economy is public confidence, and the stimulus has had a positive effect in that area. One other thing. As stimulus dollars are spent, that spending will blend into future planned spending so its cost will not be as dire as advertised by its opponents. Utah condemns government spending then happily takes it.

@ Lew Jeppson | 7:19 a.m. Oct. 17, 2009

"But then, you opposed the New Deal...You can't seem to learn." Only the die-hard left-wingers still believe the New Deal "worked". The Depression lasted ten years. Then WWII came around and ended the Depression. You would think that ten years would be long enough to prove something doesn't work.

Anonymous | 7:55 a.m. Oct. 17, 2009

What I enjoyed were the research and evidences sited in this opinion...

utah rose | 8:08 a.m. Oct. 17, 2009

Your editorial is absolutely right. Where the money seems to be going is to government jobs, and this is well documented.

It also seems that stimulus money is given for road work. Yes, we do need that but we don't need 5 men looking over some part of destruction and just standing there and doing nothing. I am tired of all the construction on 13th East and it's inconvenience to drivers, ditto the orange barrels around.

This money should be going to create jobs in the community, help people regain their homes and such. Government waste all over again.

Smity | 8:23 a.m. Oct. 17, 2009

Besides, it's not dollar for dollar. All these workers pay taxes and buy things from people who will pay taxes. Also some expenditures will be real investments that will provide value over time.

Gordon | 8:51 a.m. Oct. 17, 2009

Well said Lew! Short sighted vision has Republicans and other nay sayers looking only at the small number of immediate jobs created and using that as a criterion for the lack of success of the stimulus package, especially when compared to overall unemployment. Of course, this manipulation of statistics is understandable from the party of obstruction and other whose political perspective differs. Writing the history of the success or failure of the stimulus package is not possible since historians do not have enough perspective to make judgement. If, however, all one is interested in doing is politicizing the process, rather than making a sound historical analysis, then any myopic view will do-like the one in this editorial.

Don | 9:11 a.m. Oct. 17, 2009

And how many businesses have gone under because never ending (and often unfinished, deserted) road construction projects adversely impacted customer access?

Helping one person yes, but at the same time hurting someone else.

Atlas | 10:11 a.m. Oct. 17, 2009

Government spending steals from the honest and efficient.

Dr. Econ | 10:13 a.m. Oct. 17, 2009

Propognda is not productivity.

Keynes | 10:29 a.m. Oct. 17, 2009

Have any of you really studied Keynesian economics? His theory was tried out in the 1970s and then rejected because of the trouble it caused. Until this current financial crisis, most economists, from what I read, had rejected Keynes' ideas. Now all of a sudden we're on the Keynes bandwagon again.

There was a good NPR episode a few months back on the Keynes theories and how they've gone up and down in popularity over the decades.

Just because Keynes said something doesn't mean it is right or accepted. There are a LOT of economists who don't think Keynes theories hold water. His ideas are not automatic.

Robert Watson | 10:32 a.m. Oct. 17, 2009

Thank you Deseret News for an opinon well stated. Alas, it seems there is always two sided results in the attempt to correct problems. Determining a solution that will be best in the long run, is the challenge.

Lew Jeppson | 10:51 a.m. Oct. 17, 2009

Opponents of Keynes often fail to remember that his model includes tax cuts. The Obama stimulus package includes both.

I work at..... | 10:58 a.m. Oct. 17, 2009

a U.S. government facility that will remain unnamed. Our facility received stimulus money for several projects that did need to be done, but were projected for future completion.

Additional staff were hired, however the projects were hardly "shovel ready". The result is there are now people on the payrolls with nothing to do at this time. They will, of course be needed in the near future, and have completed all their project training, physical exams, etc. but they have yet to be productive. They show up for work, spend a boring day staring at each other, then go home at the end of the day.

However their numbers have been reported as "jobs created". This is an artificial increase - I don't doubt this sort of thing is happening at federal and state locations throughout the country.

You tax money at work.

@Lew & other oldies | 12:06 p.m. Oct. 17, 2009

Clearly you went to school a thousand years ago. Keynes theories have been disproved over and over again. They are a leftist degenerate tool. In practice, no matter the tax policy, the government never lowers spending, unless some renaissance people come into power for short periods of time. You just proved that you can't teach an old dog new tricks.

Roland Kayser | 1:20 p.m. Oct. 17, 2009

To Lew & other oldies: Studies by the Cato Institute (a very conservative think tank) have found that spending rises when taxes are cut and falls when taxes increase.
their interpretation is that a tax increase forces people to pay the full cost of the government services they get, meaning they will choose to receive fewer services. A tax cut, on the other hand, amounts to putting government services "on sale", because we don't pay full price for the services we receive. As with anything that is "on sale", we want more.

Roland Kayser | 1:24 p.m. Oct. 17, 2009

To Keynes: Keynsian economics was employed by the government starting in the 1930s, not the 1970s. I find it interesting that most of the conservative anti-Keynesian economists quickly reverted to Keynesianism the minute we encountered an actual crisis.

Sterling | 1:34 p.m. Oct. 17, 2009

The "stimulus" jobs are/were simply a new way of saying "pork barrel jobs". Government needs to get out of the "jobs" business and give "stimulus" (tax) money back to the taxpayers directly.

@Roland | 3:08 p.m. Oct. 17, 2009

So, government jobs are now the highest paying, for applicants of equal background, the government jobs and benefits are nearly double the private sector. So what's the deal about the pricing of government services, following your reasoning, government services are now overpriced, rather than on sale. Convoluted theory are baloney.

Roland Kayser | 4:11 p.m. Oct. 17, 2009

To @Roland: Please post some sources for your claim. I can not find any that support your assertion.

Brother Chuck Schroeder | 4:43 p.m. Oct. 17, 2009

Wait a minute here Utah, the ONLY stimulus non-myth is how deep is Hatch's pockets as HE takes kick-backs and perks from bureaucrats to stimulus his fancy for money, while he ignores the "Joe Sixpack" people, and stuffs all Bill's with pork, in exchange for votes, as he gives Utah pretty parks so they can hug more trees. Why would ANY ONE even vote for him over and over is a stimulus ego R trip. Sen. Orrin Hatch, Rino-Utah, told a national TV audience that he would like to kick the liberal MoveOn in the teeth for a protest it held against him outside his Salt Lake City office a day earlier. MoveOn is a scurrilous organization. It is funded by George Soros. He's about as left-wing as you can find in this country, Hatch told MSNBC about the protest. Soros is well known for spending huge amounts on efforts to campaign against George W. Bush in 2004. Hatch added, They are up to just one thing, and that is to smear good people. And frankly, they are not going to smear me without getting kicked in the teeth by me.

Lindy | 7:38 p.m. Oct. 17, 2009

Quite frankly, I don't really understand economics very well. I do not live in Utah, but see what looks like a lot of waste associated with the "Put America to work" scheme.

A bike path is being built next to a beautiful river here, and anytime you go by there are at least 5 "workers" standing around. People that walked there everyday for years do not want a bike path, and loved to walk the river path as it was, the site of an old farmstead with wild raspberry bushes and roses among massive trees.

Now, there is no pedestrian traffic allowed because bulldozers are setting there preparing to tear up the natural beauty of the river bank to lay down an asphalt eyesore. The workers have managed to tear out many trees, so I guess someone is working.

Doug G-esian | 9:42 p.m. Oct. 17, 2009

Keynesian. Keynesianistic. Keynesiologistical. Keynerioloptigcal. I love what you can do with this guys' name. And, as has been the case in previous posts, you need not know what any of it means.

Anonymous | 9:36 a.m. Oct. 18, 2009

I suspect that you don't have to be an economist to understand that the system is fundamentally flawed. It has been explained as follows.

Imagine you had a checking account with no money in it but you need to live for the day so you write a check for 25.00 to cover expenses. The next day you write a check for 50.00 + to cover todays expenses, yesterdays 25.00, and some interest. Through a process of time you start selling off that debt to your neighbors and eventually you reach a mathematical limitation where you cannot write enough checks in a day to cover it all. Or in our case we cannot print enough money.

It seems to me that the federal reserve is the problem and all the economists in the world cannot come up with a remedy for a fiat money system that is fundamentally flawed from the beginning. It is a system that wrote the economic book on something for nothing.

wait? | 1:24 p.m. Oct. 18, 2009

What happened to the 10 billion dollar surplus? I think state taxes are high enough. Sales tax is high enough and food prices are already too high. I think the state government should examine what programs they can cut or be more frugal with.

More Confused | 11:02 a.m. Oct. 19, 2009

If this type of economic ideology didn't work during the "Great" depression, which has been proven by the likes of Amity Shelas and Jim Powell, why do we think is will work now?

Next.... | 2:46 p.m. Oct. 20, 2009

Some one famous once said,"First, shoot all the lawyers." I'm sure if he were around today he'd an addendum of, Then shoot all the economists too."
Leave the people, and their money, alone! We're able to sort out our own affairs ourselves and don't need economists or government to run our lives or our wallets. I can spend my money better than the government can spend it for me.

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