A Chequer-Board of Nights and Days

From the public debate on the need for fiscal stimulus, you would think the only open question is what form it should take. In fact, among economists, there is a good deal of uncertainty and doubt over whether fiscal policy holds much promise.

John Cochrane, a professor at the University of Chicago Booth School of Business, says that among academics over the last 30 years, the idea of fiscal stimulus has been discredited and in graduate courses, it is "taught only for its fallacies."

New York University economist Thomas Sargent agrees: "The calculations that I have seen supporting the stimulus package are back-of-the-envelope ones that ignore what we have learned in the last 60 years of macroeconomic research."

Nobel Laureate Gary Becker says any benefits will be modest at best.

For the government to finance infrastructure spending or tax cuts, it has to borrow money. The money is thus unavailable for private investment or consumption. Right now, companies and individuals are having trouble getting credit, which is a big reason for the downturn. But if the government borrows more, they will have an even harder time finding lenders. So the effort could be self-defeating.

This ought to be fun. We are going to run the budget deficit into the trillions of dollars for . . . likely, no effect whatsoever. Behold Hope and Change.

Amazingly enough, the mainstream media barely even focuses on the possible objections to the fiscal stimulus schemes of the incoming Administration. One would think that this is the time to ask ourselves whether running the budget deficit into heretofore unexplored territory is a good idea but the media evidently has other plans and has decided to fall down on the job as a consequence. It's nice to see that Jon Henke is on the case--and yes, his label for the stimulus package is quite apt--but other people, people with television cameras and microphones and the ability to generate news stories for the tube, need to be as well.

(Thanks to Greg Mankiw for the link.)