Stimulus issues

One thing seems to be missing so far from commentary on the stimulus package: criticism of the cash handouts.

As I noted only a couple of weeks ago, Peter Martin had belatedly pointed out that the US experience indicated that temporary gifts of cash did not do much to increase consumer spending.

So what do we get now as a big component of stimulus? More immediate cash. I am waiting for Peter Martin's comments on this, as he is yet to express his own opinion.

Oddly, Ross Gittens has seemingly decided that economics is just a magic art that no one can ever truly know anything about anyway:

It's all very well for Gerry Harvey to say the cash splash failed because he saw no sign of it in his stores. The economy is just a bit bigger than Harvey Norman. The fact is we don't yet have most of the figures for what happened in the economy in December, or even the last three months of last year.

And even when we get the figures it won't be easy to detect what effect various government measures have had on them. For instance, since there are no miracle cures, evidence of the economy's continued decline doesn't prove the measures did no good.

To measure accurately the effect of the measures you have to know something we'll never know: what would have happened in the economy had the authorities not done what they did.

As for my take, which is just as good as anyone else's at the moment, the package deserved better targeting; much better targeting.