A friend recently sent me this article pertaining to the stimulus efforts. I could sense a good deal of frustration coming from his side, pertaining to the ongoing argument and lies from the government. My comments back to him were as follows:
I normally agree with your statement regarding politics, but I think this is a different situation. The lies in this case are not the typical bold-faced lies you might expect. The economists/experts truly don't know if the stimulus will or won't work in this situation, but depending on their political affiliation are giving answers in line with their political beliefs. So their arguments are based more on "religion" than science. The reason that they honestly do not know is because:
1) we luckily haven't had many recessions so there is not enough prior data from which to draw conclusions
2) the recessions we have had haven't been this severe. We've historically been able to use monetary policy (interest rates) to get out of recessions, but monetary policy doesn't work in this case when the banks are broken, so we are resorting to fiscal policy (taxes and govt spending).
The difference between the two camps (for stimulus vs against stimulus) stems from assumptions about (1) the efficiency of the government, (2) the multiplier effect of government spending, and (3) the amount and value of idle resources in the economy. Each of those three variables is highly subjective. So both camps are using the same economic model with very different assumptions. Obama's camp obviously argues that govt is efficient, the multiplier effect is large, and that there are lots of idle resources in the economy.
You may think that we will just have to wait until the economy recovers to see which side was right but unfortunately it doesn't work that way. Since the recovery will be driven probably by a combination of the banking system returning to health, some stimulus efforts, and other factors, it's impossible to pinpoint the cure. However, I have a feeling that when Obama is running for re-election in a few years we will be hearing all about how the stimulus plan worked, and the other side will be arguing the opposite.
So, I guess the point is... get used to it.
