Cato Daily Dispatch for January 18, 2008
Bush to Announce Stimulus Plan
Romney Campaigns on Health Care
Google Inaugurates D.C. Office


Bush to Announce Stimulus Plan

"The stock market plunged again on Thursday on bad economic news, taking little comfort from reassuring words by the chairman of the Federal Reserve or an emerging consensus about a stimulus plan that many worry could be too late," The New York Times reports. "On a day when stocks were pushed down another 3 percent on reports of more weakness in housing and manufacturing -- bringing the decline this year to a stomach-churning 9 percent -- all the major players in Washington agreed on the need for putting extra money into people's hands quickly."

In the Cato Daily Podcast "Cash Advance Stimulus," Chris Edwards, Cato's director of tax policy studies, comments: "I think that Mr. Bernanke has been drinking the same sort of Keynesian Kool-Aid that other prominent economists like Larry Summers have been drinking. I don't believe it works, I don't believe that if the federal government borrows a hundred billion dollars and spends it, just gives it to Americans, I don't believe that is good for the economy. I think it simply pushes debt onto future generations of Americans, so I actually think there is a moral question here. A stimulus package simply is the federal government borrowing more money, giving it to people now, just sort of randomly and then putting the tab on taxpayers and our children in the future. It seems to be very immoral for the federal government to go ahead and do this when frankly they have no idea what they are doing with the economy.

"Economists have a horrible track record on forecasting what the economy is going to do, even a few months ahead of time. This sort of stimulus package is just a shot in the dark, it's a big waste of money and it just increases the nation's debt."

Cato senior fellow Dan Mitchell comments:

"The president's proposed stimulus based on 'temporary' tax cuts designed to boost 'consumer spending' will not work. It is a disappointing re-run of the misguided policies of Jimmy Carter. Rebates are particularly disappointing because they resuscitate the discredited Keynesian notion that an economy benefits when the government borrows money from people in one sector of the economy and distributes it to people in another sector of the economy. Economic growth occurs when there is an increase in national income, not a redistribution of national income. That is why lower marginal tax rates on work, saving, and investment are the best short-term and long-term strategy for faster growth. But such tax rate reductions should be permanent since temporary tax cuts -- even well-designed tax rate reductions rather than rebates -- do little more than generate economic activity today at the expense of less activity in the future."


Romney Campaigns on Health Care

"At the Republican debate in New Hampshire earlier this month, presidential hopeful Mitt Romney gave himself a gentle pat on the back for the health-care system he helped create in Massachusetts," Newsweek reports. "'A lot of people have ideas about health care and improving health care. We took the ideas and actually made them work,' he said. At an earlier stop on the campaign trail he called the plan 'a good model for other states.'"

In the Cato Policy Report article "Lessons from the Fall of RomneyCare," Michael Tanner, Cato's director of health and welfare studies, writes: "Government health care programs like Medicare and Medicaid threaten future generations with an enormous burden of debt and taxes. Given these pressures, the temptation for a quick fix is understandable. But as Massachusetts has shown us, mandating insurance, expanding subsidies, and increasing government control isn't going to solve those problems. A mandate imposes a substantial cost in terms of individual choice but is almost certainly unenforceable and will not achieve its goal of universal coverage. Subsidies may increase coverage, but will almost always cost more than projected and will impose substantial costs on taxpayers. Increased regulations will drive up costs and limit consumer choice.

"The answer to controlling health care costs and increasing access to care lies with giving consumers more control over their health care spending while increasing competition in the health care market."


Google Inaugurates D.C. Office

"On Thursday night, a few hundred familiar faces in the technology policy scene -- a slew of think tank, advocacy group, and trade association folks; abundant congressional staffers; a smattering of government officials; journalists and public-relations flacks--braved unrelenting sleet and rain to see the search giant's new downtown digs awash in dim lighting that changed from one rainbow hue to another as the hours passed," CNet News reports. "Google employees, on the whole, may be overwhelmingly Democratic Party donors (excepting the runaway popularity of Republican presidential candidate Ron Paul) but this shindig turned out to be a bipartisan affair."

In "Parasite Economy Latches onto New Host," Cato executive vice president David Boaz writes: "What should concern us here is how the government lured Google into the political sector of the economy. For most of a decade the company went about its business, developing software, creating a search engine better than any of us could have dreamed, and innocently making money. Then, as its size and wealth drew the attention of competitors, anti-business activists, and politicians, it was forced to start spending some of its money and brainpower fending off political attacks. It's the same process Microsoft went through a few years earlier, when it faced the same sorts of attacks.

"Google's new presence in Washington is entirely understandable, but it is a tragic symbol of the diversion of America's productive resources into the unproductive world of political predation and the struggle to resist it."

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