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Bailouts and Stimulus Plans - Addendum 1/28/09

Fri, 15 Dec 2017 19:20:03 GMT

By EUGENE F. FAMA In his NY Times blog Paul Krugman attacks my piece on the stimulus plan. Again, here is my argument in three sentences. 1. Bailouts and stimulus plans must be financed. 2. If the financing takes the form of additional government debt, the added debt displaces other uses of the same funds. 3. Thus, stimulus plans only enhance incomes when they move resources from less productive to more productive uses. Are any of these statements incorrect? (Read the full entry)