Interview with KFOX News

I was interviewed by KFOX News here in El Paso this evening. I listened to President Obama's speech with two friendly construction representatives who were obviously in favor of the stimulus. We knew we didn't agree, but we got along well enough. I was asked about the stimulus and made it known that I am extremely pessimistic that fiscal stimulus will work. Anyone who says that there is significant agreement amongst economists that fiscal stimulus actually works, is deceiving you. There isn't. It didn't work during the Great Depression and it sure didn't work for Japan during the 1990s. Japan has never fully recovered from its lost decade and the only thing that's left to show for it is a ridiculous amount of debt (and a lot of useless roads). This is what worries me. The usual response to this is that past stimulus expenditures didn't go far enough to have their effect. I believe drug addicts often use the same reasoning, "Just a little more, and I'll be good!"

I have a real problem with this concept in macroeconomics called the "paradox of thrift." This means that while thrift may be economically reasonable for the individual/family, for the economy as a whole it is destructive. How does this even make sense? Until recently, our problem was that we didn't save enough. Now our problem is that we aren't spending enough and therefore the government has to do it for us? I hate macroeconomics. The main thing I learned from my graduate economics course is that economists don't really know very much about macroeconomics. Macroeconomics as it is currently being applied by the federal government contradicts with basic microtheory upon which it should be founded. In short, in order to solve a problem that was created by Americans living beyond their means, Americans must continue to live beyond their means.

Anyway, I attach the transcript and the video here. You gotta love soundbites. Obviously, I said a lot more than this, but you give them something catchy, and of course they'll use it. However, it does basically sum up my feeling on the stimulus.