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Tuesday, June 23, 2009

Falling Stimulus

It’s frustrating as an economist when polls and politics show support for misguided economic ideas and policies. That is, like the notion that the government extracting huge amounts of resources from the private sector – whether through taxing or borrowing – and spending those dollars according to political preferences will be good for the economy.

But earlier this year, the polls showed strong support for such silly ideas. Of course, it’s hard to blame “the people” when so many fellow economists peddle such tripe.

Today’s Washington Post, however, points to a shift in the right direction on so-called government-led stimulus. The Post reported:

• "Barely half of Americans are now confident that President Obama's $787 billion stimulus measure will boost the economy,… Overall, 52 percent now say the stimulus package has succeeded or will succeed in restoring the economy, compared with 59 percent two months ago. The falloff in confidence has been sharpest in the hard-hit Midwest, where fewer than half now see the government spending as succeeding. In April, six in 10 Midwesterners said the federal program had worked or would do so."

• "The falloff since April cuts across partisan lines. Confidence in the package's effectiveness has dropped from 81 percent to 73 percent among Democrats and from 32 percent to 26 percent among Republicans. Among independents, it has dropped from 56 percent to 50 percent. What was once a clearly positive assessment of the program among independents (56 to 39 percent) is now an almost even split (50 to 47 percent)."

Of course, there’s a long way to go here, to say the least. And much of the recent shift likely is attributable to general frustrations with the ongoing state of the economy, rather than a sudden understanding of how the economy works. But it’s a start, and an opportunity to present substantive alternatives.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

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