Stimulus Surprise: Companies Retrench When Government Spends

Harvard Business School ^ | 5-24-10 | Sean Silverthorne

[bigbob]

New research from Harvard Business School suggests that federal spending in states appears to cause local businesses to cut back rather than grow. A conversation with Joshua Coval. Key concepts include:

* The average state experiences a 40 to 50 percent increase in earmark spending if its senator becomes chair of one of the top-three congressional committees. In the House, the average is around 20 percent.

* For broader measures of spending, such as discretionary state-level federal transfers, the increase from being represented by a powerful senator is around 10 percent.

* In the year that follows a congressman's ascendancy, the average firm in his state cuts back capital expenditures by roughly 15 percent.

* There is some evidence that firms scale back their employment and experience a decline in sales growth.

[bigbob]

The knowledge has finally come even to the ivory-covered walls of Harvard that government intervention in the private sector has unintended consequences: When government spends more, the private sector spends less.

Or to put it more bluntly: The whole notion of the "stimulus" doesn't work. Unless you don't really give a damn about private business investment and capitalism.

[Titus Quinctius Cincinnatus]

How DARE these stupid companies act intuitively to artificially-imposed external pressures!!!!

/do I need it?

[Army Air Corps]

How can this be a surprise to anyone with an IQ above room temperature?

[WOBBLY BOB]

Employers on Strike

http://www.freerepublic.com/focus/f-news/2528169/posts

[Pollster1]

They forgot to describe the results as “surprising” and “unexpected”.

[Lancey Howard]

Unless you don't really give a damn about private business investment and capitalism.

With animals like Ubama and the rats, government is God.
No joke.