WHATS SCARIER THAN THE DEFICIT? 100 ECONOMISTS
One hundred top economists, including six Nobel laureates, want to make an even greater joke out of fiscal discipline by boosting federal spending in an effort to hype the economy. Its always difficult to get a group of economists to agree on anything. When 100 of them say the same thing, something must be wrong. It is.
Their open letter to the White House, the Federal Reserve, and Congress calls for more spending even if it would widen a federal budget deficit that, by the governments latest projections, will still be greater than $200 billion a year at the start of the next millennium. If the economists proposals could be magically enacted into law, financial markets would swoon, a resurgence in inflation would be all but assured, long-term interest rates would spike upward, and monetary policy would be thrown into chaos.
To be sure, the economists stress the right things. Their general theme is investment, not consumption. Reducing the cost of capital, restoring financial stability to state and local governments, shoring up the nations crumbling infrastructure, and promoting productivity-enhancing investments in machinery, education, and health clearly are the directions in which policy ought to be headed. But not by simply handing $50 billion to state and local officials, as the Gang of 100 recommends. What is needed are incentives for state and local governments to deliver services more efficiently, not a jackpot that will feed handouts to members of public-service unions. This is one time were glad there is a stalemate between the Hill and White House. It means this set of proposals has no chance of being adopted.