The Anti-Stimulus

My column for Forbes is up this week, and yet again I address issues related to the stimulus.  This time, rather than questioning the Keynesian multiplier, I observe that Congress has passed several pieces of legislation which act as "anti-stimulus" whose magnitudes dwarf that of any fiscal stimulus programs, even at multipliers greater than one.

Larger corporations are going to face different economics, but they too seem to be anticipating higher future costs from this legislation. For example, while they may not face the penalty for having no health care plan, they will face higher Medicare taxes, taxes on overly rich plans, and increases in health care premiums. If the average business is anticipating a 5% increase in payroll-related expenses, and given that total private payrolls in the U.S. are around $6 trillion, this implies that businesses may be planning for $3 trillion of health care anti-stimulus over the next 10 years.

Similar scale numbers can be found for the overall effects of cap-and-trade. Perhaps the best estimate we have is the CBO scoring of the Kerry-Lieberman bill, which estimated that payments for carbon allowances over the first ten years would total $751 billion. Assuming that the costs of most of these allowances are passed on to consumers, then this bill represents another three quarters of a trillion in anti-stimulus. In addition, expiration of the Bush tax cuts, card check, and a number of new regulatory initiatives all will drive this anti-stimulus expectation higher. Is it any wonder, then, that the private sector yawns when the Congress rushes back from vacation to pass a $26 billion jobs bill?


  1. jsalvati:

    I certainly won't defend fiscal stimulus, and I don't know your opinion on monetary policy, but I found the following paper very useful as a primer on monetary economics ( I think it does a much better job of explaining monetary economics than most macroeconomists do. It explains it from a totally micro viewpoint focusing on how the demand for money has macroeconomic effects.

  2. jimbrock:

    You missed a decimal point. 5% is on twentieth, not one half. 300 billion, not 3 trillion.

  3. caseyboy:

    Keep in mind that the ultimate goal is to gain control of the engines of our economy. They are just pouring sugar in the gas tanks now so that the engines sputter giving them the opportunity to fix them by adding more regulations to take control. They don't have to own every company to control them. Too many people assume they are incompetent on the economy, however, when you understand the objective you gain an appreciation for just how diabolically successful they have been.

  4. ryan:


    "You missed a decimal point. 5% is on twentieth, not one half. 300 billion, not 3 trillion."

    You missed the part about the next 10 years. 5% per year times 10 years = 50% = one half.

  5. TXJim:

    Good on ya Coyote. Glad to see you out front and laying down some logic. Lame comments on my part I know but what the hey.

  6. Mba Business:

    Nice to see your blog,and the information is very informative.Thanks for sharing the article.
    Marlynn Costa

  7. spiro:

    From the perspective of our double digit unemployment rate, how can you justify a 5% increase in payroll expenses? If somehow you are able to keep your income flow steady and control all your other expenses, a business owner MUST now fire 1 out of every 20 employees to balance the books. And it's not as though this money is going to create more government jobs either.

    Again, government cannot create jobs, only eliminate them.