Pro-Growth Tax Policy, Not a Transfer of Funds, Will Stimulate the Economy

Stephen Keen /

The House Budget Committee yesterday held a hearing, “Economic Recovery: Options and Challenges.” The headliner of the event, Federal Reserve Chairman Ben Bernanke, caused quite a stir with his near endorsement of a proposed second stimulus bill. However, others who spoke at the hearing, such as Rep. Paul Ryan (R-WI), and Bill Beach, director of Heritage’s Center for Data Analysis (CDA), raised important questions about the need for, and possible elements in a second stimulus bill.

Federal Reserve Chairman Ben Bernanke testifies during a House hearing

Ranking member Ryan’s opening statement regarding another stimulus bill appropriately warned against hastily increasing government spending in a misplaced effort to stimulate the economy. He pointed out:

Ryan hit the nail on the head. As we noted in September, without major alterations, a second stimulus bill will fail.

Fortunately, there are alternatives to the current stimulus proposals. Heritage’s Beach, sketched out a few available options in his testimony:

Expanding the federal government is not simulative. Although proposed government spending hikes may be well-intentioned, they will ultimately fail. Congress should follow Beach’s advice and include pro-growth tax policies in the second stimulus bill.