Commentary

The pitfalls of fiscal stimulus

As President-elect Obama, in sync with Congress, gears up for a major new stimulus package, the following documents will be useful for skeptics. From the Brookings Institution, a sympathetic yet cautionary primer, If, When, How: A Primer on Fiscal Stimulus, can be found here. For skeptics, the Kansas City Federal Reserve Board hosted a symposium on the effects of fiscal stimulus. UC-Berkeley’s Alan Aurbach wrote a useful paper that can be found here, concluding in part:

There is little evidence that discretionary fiscal policy has played an important stabilization role during recent decades, both because of the potential weakness of its effects and because some of its effects (with respect to investment) have been poorly timed.

Martin Feldstein wrote an equally useful comment that explored more fully the role of monetary policy in providing economic stability.

Samuel R. Staley, Ph.D. is a senior research fellow at Reason Foundation and managing director of the DeVoe L. Moore Center at Florida State University in Tallahassee where he teaches graduate and undergraduate courses in urban planning, regulation, and urban economics. Prior to joining Florida State, Staley was director of urban growth and land-use policy for Reason Foundation where he helped establish its urban policy program in 1997.