Calling John Galt

In the Freakonomics blog, Justin Wolfers tries to make the case for another round of Federal Stimulus.

Some argue that the original stimulus didn’t work, and so we shouldn’t try more.

This is silly for a variety of reasons. First, it is way too early to tell. Second, the economy may be bad, but to figure out whether the stimulus helped or hurt, you need to know the counterfactual: how would the economy have performed otherwise?

The two arguments here are stunning in their lack of logic.

1. If it is way too early to tell if the Stimulus was a failure, then it’s too soon to throw more money at the project!
2. The fact that we had a first stimulus destroys the counterfactual – just as not having a second stimulus destroys the counterfactual argument for continuing the program! How will the economy perform with more stimulus?

Finally, there’s the issue of all the unspent Stimulus. We’ve only used a fraction of the $800-billion originally allocated. Maybe Wolfers could argue we should have spent that allocation faster, and on actual activity that stimulates the economy and not special interest groups and partisan political projects?

If I buy a dozen eggs and eat two of them, it would be stupid to come back and say “Four eggs would be great! Let me buy another dozen!”

The resistance to the Stimulus is the broken eggs – the sheer amount of waste we must deal with to get to the “good spending.”  (Yes, I deny the existence of “good spending” in my opposition to Keynesian theory, but for the sake of argument if you grant them the possibility their own logic still fails.)