Frequently Searched

State legislators should learn from failed federal stimulus efforts

November 5, 2014

State legislators looking to spur job creation should reject federal stimulus efforts as a model. In fact, there are at least two lessons in what not to do that policymakers can learn from President Obama’s failed effort to energize economic growth through government spending and temporary tax gimmicks.

Lesson 1: Government spending does not usually create new employment opportunities for the unemployed. A study from the Mercatus Center at George Mason University shows the firms that received federal stimulus money were more likely to hire currently-employed workers from other firms or from outside the labor force than from the ranks of the unemployed. That’s because the money was directed not by market forces but by bureaucrats. As a result, it went to firms that weren’t necessarily prone to new investment or the most in need of assistance.

Lesson 2: Temporary measures don’t spur new long-run economic activity. Imagine a temporary tax cut that is meant to spur hiring today. The business that might need to hire a worker knows the benefit will likely disappear in a few years. So they will either avoid hiring or they will simply hire workers on only a temporary basis.

Added to these economic truths is the continuing uncertainty of future tax and regulatory burdens coming from Washington. The federal government has queued up economic threats just waiting to pounce on businesses, from new air-quality controls to the massive debt load that could precipitate higher taxes in the future. Federal policy seems bent on ensuring a high degree of uncertainty and growth-dampening policies that hang like smog over the future.

Against that backdrop, it’s no wonder businesses are sitting on their investment capital instead of taking the risks that are vital to robust economic growth and job creation.

Elected officials at state capitols should learn from these mistakes and instead focus on ways to lower the regulatory and tax burdens on all businesses, not just a select group, and to do so for the long run by making those changes permanent.

Stephen Slivinski is senior economist for the Goldwater Institute.

Learn More:

Mercatus Center: Did Stimulus Dollars Hire the Unemployed?

Mercatus Center: No Such Thing as Shovel Ready: The Supply Side of the Recovery Act

 

 

More on this issue

Donate Now

Help all Americans live freer, happier lives. Join the Goldwater Institute as we defend and strengthen freedom in all 50 states.

Donate Now

Since 1988, the Goldwater Institute has been in the liberty business — defending and promoting freedom, and achieving more than 400 victories in all 50 states. Donate today to help support our mission.

We Protect Your Rights

Our attorneys defend individual rights and protect those who cannot protect themselves.

Need Help? Submit a case.

Get Connected to Goldwater

Sign up for the latest news, event updates, and more.

Wait! Don’t close this yet!

We are grateful for your support of the Goldwater Institute’s efforts to advance and defend liberty throughout the United States. For over 36 years, we’ve been defending the rights of Americans to live their lives free from government interference.

And Goldwater is unique in that we direct our efforts to the 50 states where we introduce and advance innovative ideas that expand freedom. And we fight in courtrooms and capitals nationwide to defend individual liberty.

In 2024 alone, we scored over 50 policy and litigation victories defending liberty!

And that’s just the beginning.

Our plans for 2025 include:

  • Stopping pernicious DEI and other woke programs in America’s universities.
  • Ensuring that patients suffering from rare and terminal diseases have access to cutting-edge, lifesaving medical treatments, without having to first seek permission from the government.
  • Defending parental rights across the United States so that parents can send their kids to the school that best fits their needs, free from leftist indoctrination.
  • Eliminating government interference in the fundamental right of individuals to own property and use it as they see fit.
  • And much, much more

We seek to restore the presumption of liberty; that people are free to act without first asking permission from the government.

But we cannot do this without you. Will you join us as we fight to preserve and advance liberty throughout the country? As we seek new and innovative ways to defend freedom in all 50 states?

And there’s great news: Thanks to a generous Goldwater supporter, your donation today will be doubled!

So please, join us in fighting to advance liberty and score real wins for freedom from coast to coast!