When the state spends money, the money has to come from somewhere

The Wall St Journal is a joy to read because it’s a business newspaper which is also proudly free market (and explicit about its philosophy). In contrast, the FT leader column seems to think it is being all clever and counter-intuitive by bashing capitalism now and again, and applauding the more naive schemes of the government. So it’s only in the WSJ that you have little reminders about what a stimulus is for, when it works and when it doesn’t. And crucially why it’s not the case (as Obama seemed to suggest in a speech on Thursday) that any government spending is good. As its editorial says today

“A dollar doled out in jobless benefits may well be spent by the worker who receives it. That $1 of spending will count as economic activity and add to GDP. But that same dollar can’t be conjured out of thin air. The government has to take that dollar away from someone else — either in higher taxes, or by issuing new debt in the form of a bond.