Dear NY Times: Let's Not Create Another Bubble
Editor, The New York Times
To the Editor:
Because Frank Rich sensibly claims that "the job growth the Bush administration kept bragging about ('52 straight months!') was a mirage inflated by the housing bubble," I'm mystified that Mr. Rich so unquestioningly supports stimulus spending ("Herbert Hoover Lives," Feb. 1.)
Today's woes are the result of this bubble having burst. Many of the consumption and production plans made during the bubble period – plans made on the basis of out-of-whack prices – are now proven to be unsustainable. Workers and entrepreneurs must adjust to a new and more realistic pattern of prices. These adjustments, although painful, are necessary if we're to have sustained and real economic growth.
But injecting massive additional government demand into the economy risks recreating, if only for a short time, the faulty pattern of demands, prices, and production plans that got us into this mess to begin with.
Donald J. Boudreaux
Don Boudreaux is the Chairman of the Department of Economics at George Mason University and a Business & Media Institute adviser.