Gary Becker and Kevin Murphy: There's No Stimulus Free Lunch

http://online.wsj.com/article/SB123423402552366409.html

Highlights:

1) How much increase in Gross Domestic Product (GDP) can be expected from the stimulus package?
2) The increased government spending in the stimulus package is supposed to be only temporary, until the economy returns to a full employment level, but probably won't be.
3) The effects on consumers and businesses of the stimulus package depend not only on the stimulus to short-term GDP, but also on how valuable the spending is.
4) There are no free lunches in spending, public or private.

Our own view is that the short-term stimulus from the legislation before Congress will be smaller per dollar spent than is expected by many others because the package tries to combine short-term stimulus with long-term benefits to the economy. Unfortunately, short-term and long-term gains are in considerable conflict with each other. Moreover, it is very hard to spend wisely large sums in short periods of time. Nor can one ever forget that spending is not free, and ultimately it has to be financed by higher taxes.