'Mr President, spending is not the answer' say top economists

Barack Obama's £576 billion economic stimulus package yesterday passed through the US House of Representatives.

While the markets have been reacting well to the news that more money will be thrown at the world's largest economy, some leading economists have stepped up their campaign to stop the moves in their tracks.

Angered by Barack Obama's assertion that everyone backs his stimulus plans, 200 economists published a full page ad in yesterday's New York Times saying they 'do not believe more government spending is a way to improve economic performance.'    

Earlier this month, the recently inaugurated President said 'There is no disagreement that we need action by our government, a recovery plan that will help to jump start the economy.'

But the economists – including a number of Nobel laureates – say they do disagree.

'More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s,' they said in their advertisement.

They said it is a triumph of hope over experience to believe that more government spending will help the US today.

'To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth,' they said.

But whatever these great minds may think, the Obama juggernaut is speeding on regardless.

Overnight, the House of Representatives voted 244 versus 188 in favour of the planned stimulus package. The plans will now have to be passed through the Senate.