by Stimulus opponents — people having high IQ but no clue The stimulus opponents’ argument boils down to this striking claim: When the government spends borrowed funds now, consumers will realize that the resulting debt spells higher taxes in the future, which will lead them to curtail their current spending. Those cutbacks will offset the increased government spending dollar for dollar, leaving no net stimulus … There may be people who would actually spend less now to hedge against uncertain future tax liabilities. It’s unlikely, though, that you know any of them. As behavioral economists have been pointing out for decades, that’s just not the way most people behave. Hardly any consumers even know how big the national debt is, much less how it might affect
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Lars Pålsson Syll considers the following as important: Economics
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Stimulus opponents — people having high IQ but no clue
The stimulus opponents’ argument boils down to this striking claim: When the government spends borrowed funds now, consumers will realize that the resulting debt spells higher taxes in the future, which will lead them to curtail their current spending. Those cutbacks will offset the increased government spending dollar for dollar, leaving no net stimulus …
There may be people who would actually spend less now to hedge against uncertain future tax liabilities. It’s unlikely, though, that you know any of them. As behavioral economists have been pointing out for decades, that’s just not the way most people behave. Hardly any consumers even know how big the national debt is, much less how it might affect their future tax bills …
Antigovernment activists want us to believe that the possibility of facing unspecified tax liabilities at some unknown future date would cause people to increase savings by enough to offset every penny of additional government spending.
It’s an absurd claim, but in a climate dominated by antitax, antigovernment rhetoric, the mere fact that some people say economic stimulus won’t work is enough to halt conversation. We’re told that economic stimulus financed by borrowed money will raise the national debt, which will impoverish our grandchildren. And since most people don’t want to impoverish their grandchildren, the discussion ends there.
But prudent public investment does not impoverish our grandchildren at all. On the contrary, when the government borrows money at 4 percent and invests it in a project that yields 18 percent during an economic downturn, the effect is not only to put people to work who otherwise would have been sitting idle but also to enrich our grandchildren.