January 4, 2008 10:06AM

Keynesians in the White House

President Bush is considering a “stimulus package” to boost the U.S. economy. But the idea that the government should be trying to manipulate short‐​term economic performance with fiscal policy is very misguided. 

The Washington Post today quotes a Bush advisor: “What everyone’s looking at is what is the fastest way to get money out there.” Huh? Where does the advisor think the money is going to come from? This stimulus concept is Keynesian mythology and should have been buried decades ago.

What Bush and Congress should consider are long‐​term, permanent changes to the tax code to make the economy more productive, such as a corporate tax rate cut or more favorable treatment for capital investment. If that helps in the short‐​term, that’s good, but spurring long‐​term growth in the economy is far more important than worrying about temporary ups and downs.