The Insolvent Investor

Investing and economics – it isn’t easy.

Fiscal stimulus doesn’t work

Posted by Warren on August 7, 2008

Our tax dollars

Our tax dollars

Harvard economist Marty Feldstein wrote a great piece in the

Wall Street Journal today about why fiscal stimulus (including the last rebate and Obama’s plan) does not work.

Marty, as usual, is right on the money. Fiscal stimulus suffers from a significant time lag to its impact on the economy (if there is one), stimulus checks are often saved not spent, and stimulus can be inflationary. And so the doom and gloom for the US economy continues….

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2 Responses to “Fiscal stimulus doesn’t work”

  1. Nina said

    It does not take a Harvard economist, though, to tell us that this year’s fiscal stimulus did not have the intended effects. But for those who push for it in the first place, it certainly can work, at least in the short term, as the intended purpose is political gains for being perceived as doing something about our troubles.

  2. wbuffettjr said

    While I agree with you, I do not think this view is widely held or understood. Many articles were published ex-post that seemed to support the view that the stimulus was effective:
    http://www.portfolio.com/news-markets/national-news/reuters/2008/07/30/stimulus-effective-in-lifting-spending-study

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