NCPA - National Center for Policy Analysis

Economists Don't Regret Stimulus Demise

December 21, 2001

A goodly number of U.S. economists think the fiscal-stimulus package so hotly debated by Congress in recent weeks deserved to die. Two reasons they give: it wouldn't have done much to boost the economy, and would have been unnecessary given signs the economy appears already to be on the mend.

  • Princeton University economist Alan Blinder calls the bill "too little too late" -- and its demise not "that big a loss."
  • Most economists think the economy is already on track to start creeping out of recession early next year.
  • Commerzbank Securities economist Robert Gay believes the stimulus legislation gave too many permanent solutions to what he believes to be temporary problems.
  • The estimated $75 billion to $100 billion cost of the package equaled up to 1 percent of gross domestic product -- suggesting to many economists that there wouldn't be a lot of bang for the buck.

That is in part because many of them doubted whether companies would spend their tax breaks, and as much as 20 percent of the individual tax cuts could be spent on imported goods.

Meanwhile, economists say this recession has been relatively mild, with unemployment only at 5.7 percent last month compared with a peak of 7.8 percent in the last recession.

Source: Steve Liesman and Jon E. Hilsenrath, "Many Economists See No Major Loss in No Stimulus Bill," Wall Street Journal, December 21, 2001.

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http://online.wsj.com/articles/SB1008885554255534520.htm

 

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