John Taylor and John Cogan write in the Wall Street Journal Stimulus has Been a Washington Job Killer 10/3/11
Temporary, targeted tax reductions and increases in government spending are not good economics. They have repeatedly failed to increase economic growth on a sustainable basis. What may come as a surprise is that such policies are not good politics either. Their inability to deliver promised economic benefits has invariably led disappointed voters to turn against those politicians, Democratic and Republican, who have supported them.
Mr. Obama’s $800 billion temporary, targeted stimulus plan took the same approach as Mr. Carter’s more than three decades earlier. The February 2009 bill included temporary tax rebates, additional spending on federal programs, and one-time grants to state and local governments.
It had the same negligible economic impact as Mr. Carter’s and, thus far, eerily similar political consequences. The plan’s failure preceded a historic Republican electoral sweep in the 2010 House elections and significant Republican gains in the Senate. The continuing economic discontent has placed Mr. Obama’s re-election in serious jeopardy.
That temporary tax reductions and increases in government spending can jump-start the economy and sustainably boost employment and personal income may seem like a politician’s dream policy. But the repeated failure of these short-term interventionist policies to deliver the promised economic benefits should make politicians think twice. Reliance on them has already cost dozens of members of Congress their jobs and two postwar presidents a second term.
Businesses (at least successful and survivable businesses) do not make long term plans based on short term stimulus. Even more important than lower taxes, we need stable taxes that do not threaten to change every time the president is at the podium and the Congress is in session. It is atrocious how much time and money we waste trying to estimate the tax implication of our decisions. There are significant changes almost every year, most of which rarely enter the public discourse.