1:27 PM

Sunday with Ferris

Posted by Skye |

Back Channels: A Plea to avoid a fiscal train wreck:

This is why it is best to read Kevin Ferris's brilliant Back Channels column every Sunday. Alison Acosta Fraser, director of the Roe Institute for Economic Policy at the Heritage Foundation, took time to speak with Kevin regarding the severity of our economic situation:

"There's no doubt that we're in a very severe and worrisome recession," she says. "The question needs to be, what are the best ways to think about stimulating the economy?"

She rejects the conventional wisdom of stimulus coming from rebate checks or massive infrastructure projects. The former already has proved ineffective, she says, and if Congress is bent on providing relief to low-income families suffering through the recession, the legislators should not confuse that assistance with a real boost to economic growth.

Money poured into transportation projects also will prove inadequate, Fraser believes. It didn't work for FDR in the 1930s or Japan in the late 1980s. One reason such efforts fall short, Fraser says, is that no real jobs are created. The government merely handicaps the private sector, where real growth is created, and consumes a larger percentage of the economy. (One often hidden cost of increasing government workers is those massive employee pension packages that no one can afford anymore.)

Besides, bailing out the states with money for projects they were going to fund anyway just rewards bad fiscal behavior.

The new administration seems determined to spend trillions, and roll back or eliminate tax cuts. If the whopping 150 million dollar price tag of this coming inauguration is any indication of the laissez-faire spending habits of this incoming administration, it is going to be a long, long road to fiscal recovery.

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