Working Papers

Five Reasons Why Fiscal Stimulus Won’t Work

From Henry Ergas:

the expectation of future deficits may have immediate, adverse consequences for confidence and output. However, the Government’s announcement merely sets a vague commitment to return to surplus through future reductions in spending growth. It does not say how great the cuts in spending will need to be or where those cuts will be made, and it ignores the obvious point that if there is wasteful spending that can be cut tomorrow, it ought to be cut today.

While fiscal stimulus is assumed to be popular, opinion polling is remarkably divided on the issue:

According to the Newspoll survey, 57 per cent of voters believe the economic stimulus package, which includes $12 billion in short-term cash giveaways to boost retail spending, will be good for the economy. Almost half those surveyed, 48 per cent, believe they would be personally better off as a result of the package.

posted on 09 February 2009 by skirchner in Economics, Fiscal Policy

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In what way is it “remarkably divided”?

The <a ref=“http://blogs.crikey.com.au/pollytics/2009/02/09/newspoll-turnbull-flame-out-edition/”>detailed poll results</a> in response to the “Do you think you will be personally better off” question are:


I’d call that a thumping victory for “better off”!

Added to Rudd’s huge lead in the polls (and Turnbull’s slump) you’d have to say the government spending spluge is hugely popular, and no-one is the slightest bit concerned about future deficits.

Face it, Ricardian equivalence is nonsense.

Posted by .(JavaScript must be enabled to view this email address)  on  02/09  at  01:32 PM

In other words, a slight majority think they will be worse-off, indifferent or don’t know.  A pretty poor return on $42 bn.

Posted by skirchner  on  02/09  at  03:00 PM

Where did you learn stats?  If you split the uncommitteds and neithers 50-50 its a 65-35 result!

Put another way, almost three times as many people (48%) said they’d be better off than worse off (17%).

Like I said, I’m no fan of Kev’s $42B splurge, but this result is a unambiguously very supportive of the government’s policy.

You can’t pretend otherwise just because your silly theory says people will start saving when the government starts spending borrowed money.  At least 50% of the people receiving these funds wouldn’t know the government is spending borrowed money anyway, so its a helluva stretch to say they’re changing their spending habits because of it.

Its just nonsense.

Posted by .(JavaScript must be enabled to view this email address)  on  02/09  at  03:55 PM

It makes more sense to lump the “uncommitted” with the “neither” category. 

Even if you think it makes sense to split them, surely it should be a three-way split, not the two way split you suggest?

Posted by skirchner  on  02/09  at  05:33 PM

Ok then, look at it like an election where the people have to decide whether they support the stimulus package or not.  If its decided on a first-past-the-post system, “better off” wins because its the single largest group (even if you lump “uncommitted” and “neither” together).  If its decided on a two-party-preferred system “better off” wins unless almost all of the uncommitteds and neithers opt for “worse off” as their second preference.  It it was a run-off election where one category gets eliminated after ...  ARRRGGHHHH!

FFS, I can’t believe I’m even typing this, its so bloody obvious what is the more popular choice.  You people are in deep, deep denial of reality.

Posted by .(JavaScript must be enabled to view this email address)  on  02/10  at  09:15 PM

It’s an opinion poll, not an election.

Posted by skirchner  on  02/11  at  11:48 AM

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