Taylor O. says:
I'm playing devil's advocate here so don't shoot the messenger; the stimulus e-mail going around goes as follows"A Stimulus Story"
It is the month of June, on the shores of the Black Sea, it is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.
Suddenly, a rich tourist comes to town. He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to pick one.
The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher.
The Butcher takes the 100 Euro note, and runs to pay his debt to the pig grower.
The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel.
The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town's prostitute that in these hard times, gave her services on credit.
The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.
The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything. At that moment, the rich tourist comes down after inspecting the rooms, andtakes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town.
No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism.
And that, ladies and gentlemen, is how the United States Government is doing business today.
SPOILER ALERT, SPOILER ALERT
None of these people were in debt. They all provided a value to one another. They could have used the IOU as money which they effectively did. In turn, each one provided a service or a good in exchange for the other's service and all debts were actually settled. To see this, consider the following:
The supplier worked to produce fuel and supplies. He traded these supplies to the pig grower who gave him an IOU.
But, the supplier used that IOU to pay the hooker. Now the pig grower "owes" the hooker.
The hooker used the IOU to pay the hotel. The pig grower now owes the hotel.
The hotel used the IOU to pay the butcher. The pig grower now owes the butcher.
The pig grower gives the butcher a ham, and all debts are settled.
The hotel proprietor didn't need to steal the 100 euros from the tourist and then give it back. Effectively, nothing happened with respect to the tourist.
With stimulus, the government seizes money from someone and gives it to someone else. Similarly, this is at best a zero sum game, albeit profoundly immoral. In practice, it is less than a zero sum game since the government will spend the money on things no one wants and will impair capital formation to the extent that the money would have been invested in something productive rather than consumed.
This parable has nothing to do with actual stimulus since each person freely and voluntarily exchanged a good or service. The evil was stealing the tourists money without his consent although he ultimately was paid back.
To actually equate the parable to stimulus, an additional plot should have been created where the town police seize the tourists 100 euros and spend it on a turtle tunnel (true story) or a box of dirt, and then never return the money to the tourist. The police (or Paul Krugman) then goes on Keith Olbermann and declares that he will be better off in the long run since the theft will "improve" the economy.