Richard Florida
by Richard Florida
Wed Jan 28th 2009 at 1:22pm UTC

Sachs on Stimulus

Money quote:

The most obvious problem with the stimulus package is that it has been turned into a fiscal piñata – with a mad scramble for candy on the floor. We seem all too eager to rectify a generation of a nation saving too little by saving even less – this time through expanding government borrowing.


6 Responses to “Sachs on Stimulus”

  1. Buzzcut Says:

    Ah, yes. Jeffery Sachs, the architect of “Shock Therapy” in the formerly-Soviet states.

    I’ve been advocating “Shock Therapy” in the US. Clearly, the US is overextended. The answer to our problem is to work harder, save more, borrow less, consume less, export more, etc.

    Insolvent banks need to be closed. Insolvent companies need to go bankrupt. Insolvent consumers need to retrench. And our defacto insolvent government needs to as well.

    Austerity is the name of the game. It will take time to work off all the excess capacity built up as a result of unrealistically low interest rates and irrational exuberance. A long, nasty recession is the medicine to all of our ills. We should comfort those made unemployed (which existing programs will do), but in general we should wait it out and not be in a rush to throw good borrowed money after bad.

    “Fiscal piniata”. Good one.

  2. Wil Says:

    I suppoted Obama, but don’t like the expenditures in this “stimulus package”. The more I learn about it, the more obvious it becomes that it is a slow moving, pork barrel disaster, not likely to accomplish anything substantial….The best strategy is, as stated above, to save, borrow less, revive some form of manufacturing and production, import replacement…and much less (not bigger) government

  3. Wendy Says:

    I too love the pinata metaphor. The notion also reminds me of a “lottery mentality” in which many people buy lottery tickets as part of their long-term financial planning. If instead they saved and invested the $50/week they spend, they’d be so much better off.

  4. Mike L Says:

    The problem seems to have been that our citizens borrowed a lot of money with no way to pay it back.
    So now the solution seems to be that our government borrows a lot of money with no way to pay it back.
    Or have I misdiagnosed both the disease and its purported cure?

  5. Peter Fairweather Says:

    This discussion raises a false dichotomy. The stimulus and a more benign form of “shock therapy.” are not mutually exclusive. In the short term, we need the stimulus to avoid sliding into a “lost decade” of deflation a la Japan. Once the current precipitous decline has been halted, then we can begin to address the solvency of our financial sector.

  6. Buzzcut Says:

    In the short term, we need the stimulus to avoid sliding into a “lost decade” of deflation a la Japan.

    Uh… Japan’s response to their economic woes was massive stimulus, massive spending. The Japanese have a higher debt to GDP ratio than any Western nation as a result. And all the spending did nothing to fix their problems.

    Those who are ignorant of history are doomed to repeat it. Or something.