Gregory Mankiw, writing in the New York Times, points out what most of us already believe. It is tax cuts, not government spending, that are needed to stimulate the economy.
My Harvard colleagues Alberto Alesina and Silvia Ardagna have recently conducted a comprehensive analysis of the issue. In an October study, they looked at large changes in fiscal policy in 21 nations in the Organization for Economic Cooperation and Development. They identified 91 episodes since 1970 in which policy moved to stimulate the economy. They then compared the policy interventions that succeeded — that is, those that were actually followed by robust growth — with those that failed.
The results are striking. Successful stimulus relies almost entirely on cuts in business and income taxes. Failed stimulus relies mostly on increases in government spending.
Emphasis mine. Now this might seem like a trivial point, and just more of the same: conservatives argue for tax cuts, liberals argue for increased government spending. That’s not exactly news. However, I think that the larger story here is that this is indicative of the problems that President Obama is having (and will likely continue to have) with the electorate. It is not some radical, right-wing idea that if we cut taxes people will have more money to spend. While I have no data to support this, I would bet my paycheck that if you surveyed the majority of the American people, they would agree that government needs to cut spending and taxes now in order to stimulate the economy.
Yet Obama will have none of it. He and his circle of elites truly believe that they are smarter and more capable than the rest of America. They make decisions that are in direct conflict with the wishes of the American people. Their liberal cohorts in Congress, who also believe that they are the smartest people in the room, are only too happy to go along with their President.
What we are seeing with the Tea Party movement and other grassroots efforts to oppose our massive government, is the reaction of average Americans to being governed by a big group of snobs that are proving everyday that their half-baked ideas don’t work. Hopefully, this discontent will continue, as it is precisely this sentiment that motivated our founders to throw off the yoke of England. No one wants to be told what to do by some intellectual who not only hasn’t ever done anything productive themselves, but who continues to prescribe solutions that are just flat out wrong.
The unpopular policies of this President and this Congress aren’t just unpopular: they’re wrong. 2010 can’t come soon enough.