Washington's elected officials and punditocracy have of late been consumed in hashing out the shape of an economic stimulus package. While no love has been lost between Republicans and Democrats in the pit fight over the bill's final shape, both sides say they recognize that some form of government action is needed, and needed promptly. "I can tell you that doing nothing is not an option," President Obama said today during an appearance in the economic disaster zone known as Elkhart, Ind.
As it turns out, a veritable mob of economic experts, some of them residing in the Bay Area, beg to differ. According to them, doing nothing is not only an option -- it's the best option. "Doing nothing is better than doing something," said economist David Henderson, a research fellow at Stanford's Hoover Institution. "But if you're going to do something, do something good."
Henderson was one of more than 200 practitioners of the dismal science who lent their names to a full-page advertisement, paid for by the Libertarian Cato Institute, that appeared today in the San Francisco Chronicle. "Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we the undersigned do not believe that more government spending is a way to improve economic performance," the ad stated. It went on to assert that government spending hadn't helped the U.S. during the Great Depression of the 1930s, nor Japan during its economic downturn in the 1990s.
The latter case, according to University of San Francisco economist Hartmut Fischer, another Cato signatory, should serve as warning for those cheerleading Obama's plan to create jobs through building bridges and highways. As a result of massive infrastructure investment during the 90s in Japan, Fischer said, "Today, Japan as a country is hugely indebted, but it did not seem to create jobs."
Henderson said he thinks business-friendly measures, such as eliminating the minimum wage and reducing employers' payroll taxes, could help lift the economy out of the gutter. Fischer, who said he does not oppose all government economic intervention in principle, nevertheless thinks targeted tax cuts, rather than spending, should be the focus of the present stimulus. If Obama's plan works, Fischer added, he wouldn't mind being wrong.