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Archive for December 9th, 2011

Much of the “stimulus” debate has revolved around macroeconomic issues. Obama squandered about $800 billion, supposedly to “jolt” the economy, but growth has been anemic and the employment situation has been miserable.

But it’s equally instructive to look at the microeconomic impact. And that’s exactly what the folks at Reason TV did with this expose of how money was wasted in a suburb of Washington, DC.

While the video is a damning indictment of how the faux stimulus failed, it actually is too generous in its analysis.

It looks at how much money was misallocated in Silver Spring, MD, and shows how few jobs were created, but it also should have asked what would have happened if the so-called stimulus never happened and the $800 billion was left in the productive sector of the economy.

In other words, As I wrote back in September, how much stronger would the economy be if the government had not diverted all that money to Washington?

..to paraphrase Bastiat, we want to look not only as the “seen” of government spending, but we also want to look at the “unseen” of how the money otherwise would have been allocated. What modern economists sometimes refer to as the “opportunity cost” …The relevant question, from an economic perspective, is whether the government can utilize resources more efficiently and productively than the private sector. Needless to say, there are not many types of government spending that meet this test.

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By European standards, Germany is in pretty good shape.

There’s a very large welfare state and the tax burden is quite onerous, both of which hinder growth, but Germany has been more responsible than the United States in recent years. And while this may be damning with faint praise, this modest bit of fiscal discipline is helping the nation survive as many other European welfare states are on the verge of collapsing.

Moreover, Germany (sort of like Denmark) partially offsets the damaging impact of bad fiscal policy by being free market-oriented in other policy areas, such as trade, regulation, and rule of law.

Knowing all this information, how would you describe Germany’s economic policy? Would you say it was a semi-responsible welfare state? Would you say it had left-wing fiscal policy combined with a social market economy?

I’m not sure about the best description, but I know that only a crack-addicted nitwit would put it in the same category as Hong Kong.

Yet, in an otherwise unremarkable article about the fiscal crisis in Europe, the Washington Post referred to ” fiscally conservative Germany.”

Rather than go through a lengthy explanation of why this is absurd, I figure this chart demonstrates why the folks at the Washington Post are clueless (though, in fairness, perhaps Germany is “conservative” compared to the ideology of the reporters and editors in the newsroom).

Keep in mind that this is a country that has parking-meter taxes for prostitutes and a nation with a supposedly conservative Chancellor who is leading the charge for a global tax on financial transactions.

If Germany is “fiscally conservative,” I’m a socialist.

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