By EUGENE F. FAMA There has been lots of response to my little essay on bailouts and stimulus plans. I will only comment on the negative ones that I think have merit and are overlooked in my original paper. First, however, I want to restate my argument in simple terms. 1. Bailouts and stimulus plans must be financed. 2. If the financing takes the form of additional government debt, the added debt displaces other uses of the funds. 3. Thus, stimulus plans only enhance incomes when they move resources from less productive to more productive uses. Are any of these statements incorrect? (Read the full entry)
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