Economist David Henderson at the Hoover Institution takes on Obama’s stimulus package and uses an article by Obama’s candidate for chairman of the Council of Economic Advisers, Christina Romer, to do it. In this Forbes article he notes:
To combat high unemployment, Keynesians advocate having the government
increase aggregate demand for goods and services. In the Keynesian
model, the government can do this by either cutting taxes or increasing
spending.Interestingly, though, President-elect Obama’s candidate for chairman
of the Council of Economic Advisers, Christina Romer, herself a
Keynesian, has done research that undercuts the Keynesian view of good
fiscal policy. Some of this research is in a March 2007 paper, “The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks,” co-authored with her husband, fellow University of California, Berkeley, economist David Romer.
Henderson points out what most of the media is failing to tell the public. By the time Congress acts and the bureaucracy implements the stimulus programs, the economy will either be recovering or even completely out of the recession. The Romers use President Johnson’s 10 percent income tax surcharge to illustrate this point.
The Romers point out that the surcharge was first proposed in January
1967 but wasn’t passed until June 1968. And, although the 1975 tax
rebate was passed within three months of being proposed, they note that
it was not proposed until 14 months into the 1973-75 recession. They
could have noted that the recession ended in March 1975, the same month
the rebate was proposed and three months before it was passed.
Henderson’s old boss at President Reagan’s Council of Economic Advisors, Martin Feldstein was more blunt when he testified against a jobs bill to stimulate the economy.
Feldstein told them that one of the
best indicators that we have come out of a recession is that Congress
proposes a jobs bill.
