Stimulus Petition

by Russ Roberts on January 29, 2009

in Stimulus

A number of people have asked why my name was missing from the petition against the spending package. The simple answer is that I didn't know about it. But I probably wouldn't have signed it anyway. I decided a while back not to sign these kind of petitions. First, there's usually something I don't agree with in the text, and second, the whole thing is a little weird–the idea that people should care that there are a bunch of economists who feel this way, especially given that there are a bunch of economists on the other side of the political spectrum who feel the exact opposite. So is the idea that we have more Nobel Laureates than they do? But what if it's fewer? Another reason I used to have is that when there are dueling petitions it makrs people think that economics isn't a science. People already think economists are politically motivated so why take out an ad to encourage this belief? But as I start to wonder about the scientific nature of economics myself, that argument doesn't resonate for me as it once did.

Suffice it to say that I don't think it is a good idea for the federal government to spend more money than it's already spending.

My preference for a better solution to encourage recovery is here.

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{ 27 comments }

Jim Gannon January 29, 2009 at 3:33 pm

I view it as less about who has more Nobel Laureates and more as a response to the idea that no serious economists doubt this plan. An idea put out by Obama, Krugman, et. al. I agree that no reasonably informed person can stomp there foot and state that Plan X is clearly the best approach.

Just curious, what do you disagree with in the text?

Joshua January 29, 2009 at 3:37 pm

It seems like the point is not which side has more (or more reputable) economists, but to challenge Biden's (and others') claim that every economist, right or left, favored this approach. Frankly, it would be better for people to think that economists are politically motivated and be skeptical when politicians claim to have economists on their side than for them to be cowed by a politician's false claim that the economists all agree with him.

Bret January 29, 2009 at 4:00 pm

I love the Forbes article.

Means testing those not working (i.e. retired) is moderately tricky though and can create its own set of perverse incentives unless you make the effective marginal tax rate due to means testing pretty low. In other words, one would still get something up to $1,000,000 income or $10,000,000 assets.

MnM January 29, 2009 at 4:14 pm

I think the petition was more a refutation of President Obama's assertion that "everyone agrees", than anything else. Maybe the signatories thought that people would care what they thought, and maybe they didn't. Who can say?

While I can appreciate wanting to avoid being seen as a party or ideological hack, I don't think signing this petition would have made you either of those.

Martin Brock January 29, 2009 at 4:25 pm

Since we're repeating ourselves …

Like practically every discussion of Social Security, Roberts' reform utterly misconstrues the system. The system has four components, disability insurance, survivor's insurance, Medicare and "old age insurance". Old Age Insurance is the pension program we most associate with "Social Security".

Old Age Insurance is not much like insurance. That's true. It's even less like "investment" or "saving for retirement", but it's also not like a simple welfare program.

More than any of these models, Social Security is like the historical precedent it actually replaced, according to both proponents and opponents of the system at the time of its enactment. It's like the support of aging parents by their children. This traditional, reciprocal support returns a real investment in a real means of production. Parents might prefer a political illusion to this reality, but denying the reality doesn't change it.

Most proposals for "privatizing" Social Security simply take for granted the superficial illusion that the system substitutes for "private investment", an illusion created by Social Security's statutory benefit formula. This formula entitles payroll taxpayers to benefits nominally related to the taxes they pay, but this formulaic relationship is essentially the only relationship between taxes and benefits, because the taxes actually finance current consumption of elderly, the purest form of consumption, not any investment.

Elder support is not investment. Elder support might be the yield of an investment, but it cannot be investment itself. Child support is investment, because human labor is a real means of production. In terms of human consumption, human labor is the single most value means of production. These assertions are so obvious that they hardly require a defense. To understand what's wrong with Social Security, you must only open your mind enough to acknowledge them.

The problem with the conventional "privatization" approach is that payroll taxes are not remotely like investments now, and we have no historical precedent for a system of investment in non-human capital, in a free capital market, providing universal retirement at 65 or any other age. We have no sound economic reason to suppose that such a system is even possible.

On the other hand, this proposal is based on the Social Security system's historical precedents and on what the system actually does now. It makes no assumptions about demographics, because expected yields are directly related to real investments, including the very real investments that parents make in the future productivity of their children. It assumes only that capital markets can deliver a three percent real yield on non-human capital, delivering more of this yield to people with fewer children. The proposal may not be politically correct by anyone's political calculation, but it is honest.

Martin Brock January 29, 2009 at 4:42 pm

On the other hand, this proposal is based on the Social Security system's historical precedents and on what the system actually does now.

Superheater January 29, 2009 at 4:54 pm

"All that is necessary for evil to triumph is for good men to do nothing."

I do however, suppose running cafehayek counts as doing something to combat economic ignorance and those in politics that seek to exploit its prevalence.

Randy January 29, 2009 at 5:03 pm

Martin,

Damn, blocked by astaro and can't get to the link. I was hoping to find out how you figure I've got the resources to pay for this. Seriously, my parents are welcome to stay with me, I've got a free room, but they're going to have to bring their own money and medical care.

Randy January 29, 2009 at 5:04 pm

P.S. Didn't the traditional method include a family farm? – or at least a family home? Cause I don't have one of those either.

Michael January 29, 2009 at 5:32 pm

Well, as others have said, the value of such things is that when I'm debating this and a friend says "every economist agrees with X" then I can say "how about if I show you a list of 200 university economists that say otherwise?"

If the public thinks that the vast majority of economists agree, that's a useful weapon.

BoscoH January 29, 2009 at 5:34 pm

What Joshua and MnM said. The rhetorical hammer that the Obamadministration is ratcheting up is asserting that they listen to the scientists and pay attention to facts. The obvious slap at Bush on stem cell research and global warming aside, the implication is that those who disagree are preaching voodoo and ignoring the truth. When they claim consensus where none exists or assert facts which are mere opinions, the ethics of survival call on you to call them out. Because once this steamroller gets rolling, forget about dissenting.

Flash Gordon January 29, 2009 at 5:56 pm

I don't think it was a petition. It was a one-page ad in the NYT making a statement:

we the undersigned do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

With which part do you disagree? Oh, I know. The part about lower tax rates. You want higher taxes.

Martin Brock January 29, 2009 at 6:08 pm

Damn, blocked by astaro and can't get to the link. I was hoping to find out how you figure I've got the resources to pay for this.

If you pay the payroll tax, you already pay more than I propose, and the proposal repeals the portion of the payroll tax that it replaces. Specifically, you'd pay 10% of your income from the age of 22 until your parents die, instead of the 10.7% cost of the OASI program replaced, and you'd very likely pay this amount for a shorter period, since few people have living parents at 65.

Furthermore, if your parents have remaining assets at death, you presumably get some of your payments back in their estate, though that's their choice. Your "parental support" goes into their estate. They can give it right back to you as you provide it for that matter.

Seriously, my parents are welcome to stay with me, I've got a free room, but they're going to have to bring their own money and medical care.

If they bring Social Security benefits with them while you pay the payroll tax, you already provide the money. Can't you see that?

Randy January 29, 2009 at 7:30 pm

Martin,

Ah, the Social Security money, of course. That makes sense. So then, I'll be sending about $200/mth to my parents while raising three kids. Still, its less than I'm paying now…

Martin Brock January 29, 2009 at 8:35 pm

So then, I'll be sending about $200/mth to my parents while raising three kids.

That's right. You think you're the first person in human history with these responsibilities? If you were living on a family farm a few generations, you'd likely be supporting your parents more directly.

In reality, you already support your parents this way, but you support them as part of an "elderly" collective, because payroll taxes overwhelmingly flow directly into Social Security benefits. You just think you're "earning benefits", because you believe a politician's statutory formula, hardly more meaningful economically than a fairy tale.

If you support three children, Social Security screws you far more royally than a man with no children or one who simply doesn't support the ones he has. Read the proposal, and you'll see why this must be true.

Randy January 29, 2009 at 9:21 pm

Martin,

I understand your point. I just can't do that to my kids. Its just not right.

Randy January 29, 2009 at 9:48 pm

Martin,

…however, it would be a good way to end social security. It could be voluntary. If my parents sign up, I have to pay. If they don't, I don't. I think that my parents and most of their generation would sign up, but I suspect that many in my generation would not.

LowcountryJoe January 30, 2009 at 9:00 pm

Another reason I used to have is that makes people think that economics isn't a science.

Okay, Russ, on one hand that make sense. But then on the other hand…

Mr. Econotarian February 3, 2009 at 11:28 pm

First they came for the Austrians, and I signed nothing. Then they came for the Chicagoans….

I really just want somone to point to empirical evidence for Keynesian stimulus, given government already spends about 30 percent of GDP.

If we had REAL Keynesian government (cutting spending and reducing debt during good times), I'd believe inthe stimulus more. I think 30% of GDP has tapped out the multiplier.

Richard Kruger February 9, 2009 at 9:29 am

To much pork spending and negligible results, a Democratic wish list.

Lisa February 9, 2009 at 4:08 pm

What 'irks' me more? This stimulus package, or the one Obama is already making to follow this one? Trust me. I know many People do not like Mark Levine, but his broadcast dated Feb 8, 2009, he has a special Guest, a Congress woman, who told Us of Obama's behavior and what he said during that meeting behind closed doors. Very disturbing. How many People know that Obama already has planned to inject Us with another Lethal Stimulus Package after this? How many People know he "doesn't mind paying more taxes because he lives at 1600 Pennsyvania Ave", and pays NO prperty taxes, but thinks it's agood idea? What she had said really peeved me off at Obama. He's pushing this stimulus and the next one thats not being revealed as of yet ( Todays Yahoo news, states at the very bottom, that he's not revealing the details of it ) How 'transparent' is that?

Kari February 10, 2009 at 11:34 pm

Send a RINO-gram to Susan Collins, Arlen Spector, and Olympia Snow! I did! You don’t have to be from their state to let them know what you think. I got really frustrated this summer when the “gang of ten” undermined the House of Representative’s effort to bring forth meaningful energy legislation, and I couldn’t send emails to these reps because I did not reside in their states…all of my emails were kicked out of the system. The democrats are going to do what they have always done, but, we need to hold the republicans liable…now is the time to fight!!!!

Kari February 10, 2009 at 11:34 pm

Send a RINO-gram to Susan Collins, Arlen Spector, and Olympia Snow! I did! You don’t have to be from their state to let them know what you think. I got really frustrated this summer when the “gang of ten” undermined the House of Representative’s effort to bring forth meaningful energy legislation, and I couldn’t send emails to these reps because I did not reside in their states…all of my emails were kicked out of the system. The democrats are going to do what they have always done, but, we need to hold the republicans liable…now is the time to fight!!!!

Kari February 10, 2009 at 11:34 pm

Send a RINO-gram to Susan Collins, Arlen Spector, and Olympia Snow! I did! You don’t have to be from their state to let them know what you think. I got really frustrated this summer when the “gang of ten” undermined the House of Representative’s effort to bring forth meaningful energy legislation, and I couldn’t send emails to these reps because I did not reside in their states…all of my emails were kicked out of the system. The democrats are going to do what they have always done, but, we need to hold the republicans liable…now is the time to fight!!!!

Kari February 10, 2009 at 11:34 pm

Send a RINO-gram to Susan Collins, Arlen Spector, and Olympia Snow! I did! You don’t have to be from their state to let them know what you think. I got really frustrated this summer when the “gang of ten” undermined the House of Representative’s effort to bring forth meaningful energy legislation, and I couldn’t send emails to these reps because I did not reside in their states…all of my emails were kicked out of the system. The democrats are going to do what they have always done, but, we need to hold the republicans liable…now is the time to fight!!!!

Kari February 10, 2009 at 11:35 pm

Oops…here's the Rino-gram link!

Eric Rasmusen February 16, 2009 at 3:34 pm

What's better is a list of names of economists with links to their positions and reasons where available:

http://rasmusen1.blogspot.com/2009/01/keynesian-stimulus.html

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