Harvard’s Jeffrey Miron Explains Why the Stimulus Package Failed

by Hans Bader on October 31, 2010 · 12 comments

in Economy, Stimulus to Nowhere

Harvard economist Jeffrey Miron explains why the $800 billion stimulus package failed in a recent article.

What’s interesting about Dr. Miron’s critique is that he shows how the stimulus was a failure even if you take for granted liberal assumptions about economic policy (such as Keynesian economic theory), since it was so badly designed and executed that it failed to achieve its goals, spending wastefully while failing to revive the economy.  Indeed, the stimulus was so poorly tailored to the economy (and the goal of reducing unemployment) that Miron concludes that it was designed to reward politically connected “constituencies” and special-interest groups, like public-employee unions, rather than being focused on ”economic stimulus.”

Other Harvard economics professors like Robert Barro have also criticized the stimulus package. Barro called it “the worst bill that has been put forward since the 1930s.”  Former Obama economic advisor Martin Feldstein, a Harvard professor who is a big believer in stimulus packages in principle, said that the stimulus designed by Obama and congressional Democrats was “poorly done

Much stimulus money has been wasted.  It has gone to prisoners and dead people, wasteful welfare spending, abandoned bridges to nowhere, and unnecessary government buildings.  The stimulus subsidized foreign green jobs and wiped out jobs in America’s export sector.

The “’stimulus’ is not the road to economic recovery. It’s the problem, not the solution, writes Nobel Prize winning economist Vernon L. Smith.” Other Nobel Laureates like Gary Becker have also criticized the stimulus package.  200 economists signed a statement publicly opposing the stimulus package in an ad published in the Washington Post and New York Times.

Laurence Burris November 1, 2010 at 4:10 am

Brother can you spare a dime?

Howard November 1, 2010 at 11:32 am

Our friend Dr. Krugman is calling for additional stimulus. He argues the first one was too timid. Therefore, in Krugmanesque terms we should have a new $5,000,000,000,000 stimulus. This would increase teachers salaries to $300,000.00 per year, early retirement for all state and local workers, and a $10,0000.00 per family gift for home improvements.

Dave M. (now in S. K November 2, 2010 at 1:49 am

The teacher's unions will still complain they are underpaid.

Reader November 1, 2010 at 4:12 pm

For Herr Krugman, there will never be enough debt and deficits.

Transylvanian November 1, 2010 at 5:52 pm

Once again, the well-connected public-employee unions profit at the expense of the American people.

jason November 2, 2010 at 5:45 am

What is the deal with labeling him "Harvard" economist? When anyone is from Harvard, Yale, Penn, Princeton, Brown, etc.. it basically tells me this is a person who is EXCELLENT at memorizing books, but STINKS at operating in a real world with real people. Theory is exactly that….

JackR November 2, 2010 at 10:54 am

Krugman can hardly afford to back off on his Keynesian beliefs now no matter how explicit a failure a stimulus may be – even if he realizes the failure. After all – the uber-liberals in Europe gave him a Nobel prize specifically because he was an American who pushes the theory so hard. If you carefully read his articles you can see just how despirate he is to convince people.

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