Friday, February 06, 2009

Cato's Reaction to the Stimulus Package

The Cato Institute, a prominent libertarian think tank, recently lambasted President Obama with a full-page advertisement appearing in the New York Times, the Washington Post, and other national publications. The Cato ad takes specific issue with an Obama statement made in early January aimed to accelerate the legislative process and convince Congress to eschew the partisan differences to pass the stimulus package quickly.

To Obama’s chagrin, over 240 economists gathered by Cato disagree with Obama’s assertion that “there is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy.” It is not surprising that the Cato Institute and other free market thinkers find fault with the stimulus package, officially known as the American Recovery and Reinvestment Act of 2009, as the bill contains hundreds of billions of dollars in spending that will expand the size of the Federal government.

While expanding the size of the federal government over the long run is a dangerous plan and will fail to contribute to economic growth, in the short run, the increase in government spending may be exactly what it will require to restart America’s economic engine. In an environment where consumers have little spending power and firms are hesitant to invest in new capital equipment, the only participant in our economy with the ability to spend may be the Federal government. While the stimulus package includes many questionable investments and is certain to cost future taxpayers dearly, the risk of inaction is far higher.


Anonymous said...

I agree with Cato, but looks like it got passed last night!