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Ten Reasons Why the Stimulus Plan Won’t Work

By Charles Sizemore⋅ August 11, 2009 ⋅ ⋅ Post a comment

FreedomWorks published a “Top 10″ list of reasons why our government economic stimulus plans won’t work: See list.

In particular, we liked point #2: “The Stimulus follows the same plan that ruined Japan’s economy”

Japan, after a dramatic market crash and a drop in real estate prices responded with government spending not unlike what the US Congress is considering today. In fact, they had 10 stimulus bills between 1992 and 2000, spending billions on infrastructure construction, building bridges, roads, and airports as well as pouring money into biotech and telecommunications. While many countries enjoyed booming economies and falling unemployment during this time, Japan had a lost decade, seeing its unemployment more than double. They spent double the US level of GDP on infrastructure, and now have a lousy economy and have one of the highest national debts in the world.

Well said. We’d like to add additional comments here, but frankly, there is much else to say. Our current stimulus plans will not make an appreciable difference in an economy that is 70% consumer spending. But they will saddle us with debts that will be with our children long after anyone reading this blog post is dead and buried.

Charles Sizemore, CFA

Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy

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Discussion

2 comments for “Ten Reasons Why the Stimulus Plan Won’t Work”

Thank you for publishing this excellent blog. I find it very informative.

I would like to point out that this post needs a correction.

Freedomworks did NOT “publish a Top 10 list of reasons why our government economic stimulus plan won’t work.”

No, they published Top 10 Reasons to OPPOSE the Stimulus. On February 2, 2009. Of that list, #1 is “The Stimulus Will Not Work.”

THe other 9 are equally catchy but flimsily supported:
#2 The Stimulus follows the same plan that ruined Japan’s economy
#3 The Stimulus is full of Wasteful Projects
#4 The Government Can’t Afford the Stimulus
#5 We Can’t afford the Stimulus
#6 The Stimulus is Bigger Than the Economic Output of Most Countries
#7 Central Planning like the Stimulus Doesn’t Work, Ask the USSR
#8 Remember the $750 Billion Bailout from this Fall?
#9 This Money Doesn’t Grow on Trees
#10 Economists do NOT Agree this is a Good Idea

With an economy which you point out is “70% consumer spending,” maybe our biggest problem is not the Stimulus package, but the fact that an economy based on mass consumerism is unsustainable.

Posted by earlyreturns | August 11, 2009, 8:38 pm
“earlyreturns” wrote: “With an economy which you point out is “70% consumer spending,” maybe our biggest problem is not the Stimulus package, but the fact that an economy based on mass consumerism is unsustainable.”

Spot on, good soul, spot on.

Value is created when a producer assembles (using the term broadly) a product that is worth more when completed than the value-sum of its separate parts.

While the U.S. continues to be a major producer, the massive shift to consumption - over the past few decades - of products that are more and more produced elsewhere is not a healthy condition for the U.S., particularly when that consumerism is being financed by those same foreign producers.

This concern is a fertile area for exploration.

Are there economic and/or demographic types of studies that reveal the long term macro and micro economic/financial effects of our growing and/or continued tendencies toward consumerism?

Posted by bazwm | August 12, 2009, 4:34 pm