Economic stimulus

Ben Bernanke may have painted a big bullseye on the Federal Reserve when he spoke last week in Jackson, Wyoming, about the Fed providing additional stimulus if the economy needs it.

I hate to pile on to Brian Riedl after both Brad DeLong and Matthew Yglesias do a pretty good job debunking his latest in National Review Online.

But...

There's much in Brian's piece that requires criticism, but here's the graph that is the most offensive:

The idea that government spending creates jobs makes sense only if you never ask where the government got the money. It didn’t fall from the sky. The only way Congress can inject spending into the economy is by first taxing or borrowing it out of the economy. No new demand is created; it’s a zero-sum transfer of existing demand.

You can't help but wonder if Rupert Murdoch knows about this.

Deborah Solomon at the WSJ today:

U.S. Economy Gets Lift From Stimulus

WASHINGTON -- Government efforts to funnel hundreds of billions of dollars into the U.S. economy appear to be helping the U.S. climb out of the worst recession in decades.

GOP House Whip Eric Cantor on CNBC yesterday:

It's really nice having Don Marron in the blogosphere. 

This is something we all need to remember when talking about the stimulus.  Here's the money quote:

...I get the sense that some users of Recovery.gov do not realize that its figures cover only the spending side of the stimulus story, not the tax side.

The total impact by the end of June of the stimulus was closer to $100 billion than the $60 billion in spending shown on the website.  Another $40 billion in tax cuts has to be included to get the full picture.

A friend of mine remarked over the weekend that when she first heard the phrase, "Cash for Clunkers," she thought it was the outlandish bonuses being paid at Goldman Sachs.  It is, in fact, something only slightly different, which could go by two other names, one of them from classical economic pedagogy and another from several prior posts on this blog.