Megan McArdle of The Atlantic writes this morning that the burden of proof regarding the government's stimulus plan should be on those who are in favor of it. She also has a few suggestions for those who think that government spending is the only way out of the mess we're in:
At least with the tax cuts, there's little risk that the money will, from the taxpayer's standpoint, be wasted. It may not create much in the way of stimulus, but it's essentially a neutral act--give them money now, take it later…Government spending, on the other hand, comes with no guarantee that whatever it buys will be worth as much to the polity as the alternative uses for the money. Hell, badly done government projects can actively destroy value—go up to Buffalo and look at the empty, useless subway that killed Main Street, for example.
McArdle does have a point: Governments are often poor money managers. But she herself reluctantly agreed back in September 2008 that the initial round of bailouts was necessary. In my mind, if there were ever a time to stay the course through the bitter end, this is it.
I admit that that sounds a lot like President Bush circa 2003-2008, but we have a real economic crisis on our hands, as opposed to the manufactured WMD scare six years ago—but that's another topic. The point is, there are a lot of respected voices telling us that bailouts are necessary, even if they're flawed, such as Paul Krugman and The New Republic's Noam Scheiber.
One can understand McArlde's frustration at the prospect of government interference in market economies. She's afraid that all government spending is wasteful, and that tax cuts for everyone will put more money into the economy and help get us out of the rut we're in.
But in the face of our current crisis, with banks collapsing and jobs disappearing, tax cuts are not the way to go because money in the hands of millions of individuals cannot be organized and spent as effectively—in theory—as the government can spend it. Putting more money in the hands of people who will immediately spend it by financing things like road construction, unemployment and healthcare benefits—as Obama's stimulus plan aims to do—means that the money will be immediately recycled into the economy, helping to stimulate growth.
Individual taxpayers, with a few hundred extra tax-cut dollars in their pockets, can't do that. Government can. Our job is to force the government to do it—intelligently and responsibly.