Monday, August 9, 2010

"More Stimulus Isn't the Answer"

So say former Treasury Secretaries Rubin and O'Neill.

A “major second stimulus” might create more uncertainty and undermine confidence, he said.

Companies concerned about demand won’t expand facilities or hire new employees until sales have improved, said O’Neill, who was Treasury secretary under Republican President George W. Bush.



They're correct about not needing more "stimulus" (can you call something "stimulus" when it doesn't stimulate?), but they've still got the recovery process backwards.

Businesses rarely wait until sales increase to start expanding. They invest in growth in anticipation of new sales. In effect, they set out to create their own demand. In the current uncertain political climate, however, they are refusing to expand because they fear any new profits they earn may be taken away from them by a tax-and-regulation-happy Washington.

Until the politicians get the cause and effect straight, there's no chance that they can help create an economic recovery.

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