|Man Without Qualities|
Thursday, January 23, 2003
The power of any government or government plan to "stimulate" the economy is very limited. One exception is often (but not always) a government-led reduction in short-term interest rates, which can have a big stimulative effect in some cases. Of course, government should do what it can, anyway, but government "plans" (fiscal and regulatory policy) going beyond immediate changes in the money supply are difficult to make work in the short term.
According to an NBC/WSJ poll just released, more than 70 percent of people polled say they expect the Bush stimulus plan will be "fairly", "very" or "somewhat" effective.
To the Man Without Qualities, that is huge public support for the plan - for the simple reason that it is almost impossible to rationally expect any government plan to be more than "somewhat" effective as a stimulus. Of course, one might be lucky - such as with the Kennedy tax cut.
What is striking here is that 35 percent of people polled actually said that they expect the stimulus plan will be "fairly" or "very" effective at helping the economy - an amazing confidence level given the actual ability of any government action at all to stimulate the economy.
But to the Associated Press all of this warrants the headline: Poll: Most Don't Back Bush Stimulus Plan.
And the Wall Street Journal reports these results as: The survey shows ... fully 61% doubt the administration's economic package will do much to stimulate economic growth.
Other aspects of the poll should serve as red flags for the Administration - especially the softening approval of the President's handling of the economy and the report that those polled by a 42%-37% margin prefer a set of proposals backed by Democrats to Mr. Bush's package.
But if the question is one of short term stimulus - and the poll seems to have focused on that question - there is no real mystery as to why the the president's centerpiece proposal to abolish taxes on stock dividends draws the weakest public support among a series of potential steps the government could take. Abolishing taxes on stock dividends is a long-term, structural repair job - not a clear short term stimulus. As Milton Friedman pointed out, if government spending doesn't go down, then money returned to taxpayers just comes back from the bond market.
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