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A Truly Terrible Analogy

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Here’s a letter to Marketplace’s Nancy Marshall-Genzer:

Nancy Marshall-Genzer
Reporter, Marketplace

Nancy:

Reporting yesterday [2] on plans for further stimulus spending financed with borrowed funds, you interviewed not a single economist who dissents from this fiscal incontinence. This omission is unfortunate.

Such a voice would have reminded listeners of traditional problems with borrowing funds for spending projects – such as that the mere act of spending money building infrastructure isn’t automatically an economy-strengthening “investment.” If the value of what would otherwise have been produced with the borrowed resources would have been greater than the value of the new infrastructure, the borrowing and spending harms rather than helps the economy. None of your interviewees seems aware of this (or of any other) potential problems with stimulus spending.

But today a dissenting voice would have also pointed out something unique to our time – namely, an economy locked down by edict and by physical fear isn’t akin to economies in the past mired in recessions because of deficient aggregate demand. People today are physically impeded – by lockdowns and by their fear of Covid-19 – from spending and working.

Rather than make sensible points, your interviewees instead ignored reality – including inaptly analogizing stimulus spending to repairing a roof today in order to prevent more costly damage to the house tomorrow. In fact, what’s going on today is more like vandals and termites wantonly laying waste to the house’s foundation and structure, with the owners hoping to keep their home in good repair by spending lots of money to mask the damage with shingles and paint.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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