Why the Stimulus Shouldn't Stimulate You

First, a little history. In real terms -- that is, after adjusting for inflation -- the average American worker today earns roughly nine times as much as his 1840 counterpart. That's because today's worker is roughly nine times as productive. (You might have thought it had something to do with labor unions, but even at their most powerful, no union could ever extract blood from a stone or extract wages that exceeded the value of production.) Today's workers are more productive because they're working with better equipment -- computerized looms instead of handlooms, for example.

That equipment was built from raw materials that were available because someone chose not to consume them.

So if 19th-century Americans had been encouraged to consume more, you'd be earning less today. And if you and I are encouraged to consume more, our grandchildren will earn less in the future.

If you care about your grandchildren, you should be encouraging everyone else not to consume, but to save.

But much of the stimulus package is designed to achieve exactly the opposite: It encourages consumption, not saving. Not that there's anything wrong with consumption; it's what makes life worth living. But my consumption benefits me, while my saving benefits you.

I've already got plenty of incentive to consume. What you should be worrying about is my incentive to save. To say it again: The more I consume, the poorer your grandchildren will be; the resources I use won't be available to build machines that make your grandchildren more productive. It's all well and good to worry about the people who are struggling today, but let's also remember the people who will be struggling in the future. The worst thing we can do for them is to encourage consumption.

And while we're thinking about our grandchildren, let's also think about our contemporaries. Over the course of a typical decade, millions of people lose their jobs one at a time. In a severe recession, millions lose their jobs all at once. But it's no more painful to be unemployed for five weeks in the middle of a recession than it is to be unemployed for five weeks at the height of a boom. In fact, it's arguably less painful: Isn't it better to be unemployed at a time when unemployment carries less stigma and when you've got unemployed friends to hang around with? (Ask those striking Hollywood writers.) So it's hard to argue that we should do more for displaced workers during a recession than we do at any other time -- especially when people who lost their jobs a few years ago, and others who will lose them a few years hence, are footing a good chunk of the bill.

And to what end? Ultimately, the only solution to unemployment is for displaced workers to get retrained and find their way back into the workforce. The new stimulus package only delays that process by propping up dying industries for a while and postponing the day of reckoning. Ultimately, there will be just as much hardship because the stimulus package can't last forever. Why spend all this money trying -- and probably failing -- to delay the inevitable?

armchair@troi.cc.rochester.edu

Steven E. Landsburg, a professor of economics at the University of Rochester, is the author of "More Sex Is Safer Sex: The Unconventional Wisdom of Economics."