Saturday, February 14, 2009

Not a "Stimulus," But a Return to Stagflation

By Joseph Kellard

The New York Times today (Sat., Feb. 14) has a good op-ed by Paul D. Ryan entitled “Thirty Years Later, a Return to Stagflation.” In it, Ryan, who is described as a Republican representative from Wisconsin, concludes that the “stimulus” plan will only ultimately lead to higher inflation and higher unemployment.

Here’s the beef of Ryan’s op-ed:

“Combine high inflation and high unemployment and you have stagflation. Hindsight shows how the pain of the late 1970s and early 1980s could have been avoided, yet we’re now again planning to borrow and spend — and raise taxes — as President Jimmy Carter did. Soon we may again find ourselves watching a rising ‘misery index’ of inflation and unemployment together. If that happens, individual earning power will evaporate, and our standard of living will decline.

“To prevent stagflation, we should enact fiscal policy reforms that apply the lessons we learned from the 1970s. Keynesian stimuli based on borrowing and spending have not worked and will not work. One-time rebate checks do not increase the incentive to expand business operations and create jobs. But marginal cuts in tax rates do. We also must lower our job-killing corporate income tax rate, the highest in the industrialized world after Japan, and ease business worries by making it clear that there will be no tax increases in 2010.

“We should also re-establish the sound dollar. For the past decade, the Federal Reserve has manipulated interest rates and vastly over-expanded the money supply — and in so doing fueled the housing bubble that precipitated our current crisis …”

Unfortunately, Ryan doesn’t call for drastic cuts in spending to accompany his proposed tax cuts, and he calls for “reform” for those socialist behemoths otherwise known as Social Security, Medicare and Medicaid. Nevertheless, this is a good op-ed that should be given support with positive letters to the editor:

Here’s my letter:

To the Editor:

Paul Ryan is correct, the “stimulus” plan will only ultimately lead to higher inflation and higher unemployment “Thirty Years Later, a Return to Stagflation” (Sat., Feb. 14).

Ryan properly points to the lesson of the government-induced stagflation of the 1970s as the logical result of the same state spending and borrowing policies at the core of the current plan. He also recognizes that the Federal Reserves policies of manipulating interest rates and expanding the money supply were an essential cause of today’s financial crisis. However, instead of calling for reform of Social Security, Medicare and Medicaid, Ryan should be targeting these bureaucratic behemoths for drastic spending cuts to accompany his proposed tax cuts.

Government interference in the economy fundamentally caused today’s crisis, and only more freedom -- more separation between state and economics -- will get us out of it.

Joseph Kellard
East Meadow, NY

Joseph Kellard is a journalist and commentator living in New York. Contact him at

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