NCPA - National Center for Policy Analysis

Before Enacting Stimulus: Stop, Look and Listen

December 12, 2001

Former Federal Reserve chairman Paul Volcker is putting forth the case that a bad stimulus package is worse than no stimulus at all -- advising that Congress wait until next year, when U.S. economic prospects are clearer, before enacting legislation.

Neither the House-passed "Republican" bill nor the Senate Finance Committee's "Democratic" bill provides a consistent or coherent fiscal approach, he argues.

  • In all likelihood we have ended -- currently and prospectively -- the pattern of overall budget surpluses built up in the 1990s.
  • More than simply stimulus measures, the two competing bills represent opposing philosophies about taxing and spending -- and the size and role of government.
  • Both approaches have doubtful incentive and distributional implications, would further complicate the tax code, and make needed tax reforms more difficult.
  • The latest economic signals are far from clear -- but monetary policy has been eased and Wall Street appears to see early signs of revived economic activity.

Source: Paul Volcker, "Bad Stimulus Is Worse than No Stimulus," Wall Street Journal, December 12, 2001.

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