Let’s say you’re the leader of the free world. The economy is stuck in the doldrums. Naturally, you want to do something.

Many economists say we need another stimulus bill. They debate about whether the stimulus should take the form of tax cuts or spending increases, but the ones in your party are committed to spending increases. They trot out a plausible theory with computer models to go with it. If the federal government borrows X amount of dollars and pumps it into the economy, that would produce Y amount of growth and Z amount of jobs. In a $14 trillion economy, you’d probably have to borrow hundreds of billions more to have any noticeable effect, but at least you’d be doing something to help the jobless.

These Demand Side theorists are giving you a plan of action. But you’re not a theorist. You’re a practical executive, and you have some concerns.


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The Demand Siders don’t have a good explanation for the past two years. There is no way to know for sure how well the last stimulus worked because we don’t know what would have happened without it. But it is certainly true that the fiscal spigots have been wide open. The U.S. and most other countries have run up huge, historic deficits. And while this has helped save public-sector jobs, we certainly haven’t seen much private-sector job growth. It could be that government spending is a weak lever to counter economic cycles. Maybe monetary policy is the only strong tool we have.

The theorists have high I.Q.’s but don’t seem to know much psychology. Lord Keynes, though a lesser mathematician, wrote that the state of confidence “is a matter to which practical men pay the closest and most anxious attention.”

David Brooks



The Demand Siders are brilliant, but they write as if changing fiscal policy were as easy as adjusting the knob on your stove. In fact, it’s very hard to get money out the door and impossible to do it quickly. It’s hard to find worthwhile programs to pour money into. Once programs exist, it’s nearly impossible to kill them. Spending now creates debt forever and ever.

Moreover, public spending seems to have odd knock-off effects. Professors Lauren Cohen, Joshua Coval and Christopher Malloy of Harvard surveyed 42 years of government spending increases in certain Congressional districts. They found that federal spending increases dampened corporate hiring and investment in those districts. You wish somebody could explain that one to you before you pass on more debt burdens to your grandchildren.



But the overall message is: Don’t be arrogant. This year, don’t engage in reckless new borrowing or reckless new cutting. Focus on the fundamentals. Cut programs that don’t enhance productivity. Spend more on those that do.

You don’t have the ability to play the economy like a fiddle. You do have the ability to lay some foundations for long-term growth and stability.

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