“Usually, government interference prolongs the problem.” 

That’s one of the conclusions of David James of James Investment Research in Xenia, Ohio.  He was interviewed on a financial news podcast I listen to.  James told the interviewer government spending tends to be very inefficient.  “We went back to the 1940’s,” he said, “and our data shows that it takes over $7 of government spending to have the same economic impact” as $1 spent by the rest of us.

After hearing that, I went to the JIR web site to find a little more information.  The report Mr. James mentioned concluded that ”only $60 billion of the authorized $787 billion has been spent, a mere pittance in a $14 trillion economy.  In addition, a lot of money is being wasted on pet projects, or will go to cover state funding shortfalls.  Furthermore, in a major blow to stimulus spending, consumer savings increased by $161 billion last month, almost three times the stimulus payments.”

James also noted the “feeding frenzy” in the Cash for Clunkers program.  He told the interviewer it may just take “future sales from future months.”  And, while he’s glad to see the boost in business, it does not mean “this is the start of a great new economy.”