Politcal economist Martin Feldstein

Martin Feldstein is a competent and knowledgeable economist who has come too much under the spell of politics and ideology. How can I tell? When a competent and knowledgeable economist comes too much under the spell of politics and ideology his analyses make excellent sense while his prescriptions don't.

In today's WSJ Martin finds himself in ironic agreement with liberal Keynesians that the fiscal stimulus package in "both its size and structure were inadequate to offset the enormous decline in aggregate demand", and that this accounts for its weak and temporary relief. This is very true. He could also have pointed out, but did not, that the very high level of federal debt made even the fiscal stimulus that was enacted very risky, putting an even larger fiscal stimulus out of the question. Instead he concentrates on the structural problems in the package, He is on sound ground here, as well, observing that "Experience shows that the most cost-effective form of temporary fiscal stimulus is direct government spending" while what we got was "... a hodgepodge package of transfers to state and local governments, increased transfers to individuals, temporary tax cuts for lower-income taxpayers, etc." Fair enough.

But what would Mr. Feldstein have preferred? An acceleration of military spending. While military spending may, or may not, have benefits to national security it is the economic equivalent of building bridges and tearing them down again. Even worse, it diverts resources from the productive consumer economy increasing the cost, and reducing the incentive, for producing consumer goods.

Additionally, Mr. Feldstein approves of "incentive" raising tax cuts for the wealthy even as his criticizes the "inadequate" demand boosting "temporary tax cuts for lower-income taxpayers". That is a pretty good formula for subsidizing investment in emerging foreign markets where the demand will be instead of here where it won't -- not that the wealthy are actually so hard pressed that they need such incentive help.

Martin is generally correct in analyzing the failures of stimulus attempts thus far, apart from suggesting that these are only President Obama's failures and that Republicans have had nothing to do with it. However, his advice today is plainly more political than economic.