4 reasons why a second stimulus is a bad idea

July 22, 2009

Wells Fargo/Wachovia economist John Siliva makes his case:

1) A second stimulus would add fuel to the already recovering economy and would create the false impression that all is now back to the “happy days” of an overleveraged consumer and strong growth. Therefore, estimates of top-line revenues are likely to overstate the true sustainable future pace of sales in a deleveraged economy.

2) A second stimulus would likely add to inflation/interest rate pressures and, thereby, higher interest rates and the cost of capital down the road.

3) A second stimulus would further raise doubts on the ability of our nation to control future spending/deficits and lead to a depreciation of the currency and possible loss of our near-exclusive role as the world’s reserve currency.

4) A second stimulus would further hide the negative impacts of the numerous micro policy proposals in place and thereby obscure, for a short time, the economic losses from the misallocation of public resources.

2 comments

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Let’s get our terminology straight on this topic. The next (God-forbid) stimulus would be the THIRD stimulus. The first was implemented by George Bush and the Democratic Congress in the form of checks mailed to everyone. The second was Barack Obama’s massive payoff to his political cronies. Both have failed miserably.

ENOUGH already. Stop spending our money. The cyclical recovery will happen, as it always does, if we just leave things alone and STOP TINKERING. Severl hundred lawyers have no idea how an economy works. They have been proving this for decades.

Posted by RichmondG30 | Report as abusive

Meanwhile the list of distinguished economists who disagree continues to grow:

http://www.cepr.net/index.php/press-rele ases/interactive-press-releases/economis ts-who-make-the-third-stimulus-honor-rol l/

Posted by Mark A. Sadowski | Report as abusive