There was a good deal of debate here a couple of years ago about government spending as a stimulus to the economy. I was against it then and I continue to hold that view today. I'd be interested to hear from those who were for it then and who continue to think it was a good idea. I'd be very interested in hearing from those who supported it but have since changed their minds. I'd be fascinated to hear from anyone who was once against the stimulus and who is now for it.

Recalling the website TOS, I am not asking about the politicians who were/are for or against it. And I am not asking who you will vote for. Just wondering whose opinions, if anyone's, have changed.

WW

 

While I agree that government spending is an inefficient way to stimulate the economy, so is supply side economics. When you give anybody money in a bad economy, the first thing they are going to do is save it because no one knows if the economy will get worse. I think both options are tools governments can use to direct an economy, but they cannot save one. The key problem is market confidence and neither approach addresses that concern.

 

What's poor Joe Consumer to do? He spends lavishly, buys too much house, runs up huge credit card bills, and gets hammered for it. Having learned his lesson, he cuts back and starts saving, then gets told his thrift is harming the economy.

 

“The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” — John Maynard Keynes

“I work for a government I dispise for ends I think criminal.” — John Maynard Keynes


In retrospect it isn't a recap, it is a kneecapping of the economy, it will be crippled for a long time.



Even capital punishment could not make price control work in the days of Emperor Diocletian and the French Revolution. Economics does not say that isolated government interference with the prices of only one commodity or a few commodities is unfair, bad, or unfeasible. It says that such interference produces results contrary to its purpose, that it makes conditions worse, not better, from the point of view of the government and those backing its interference.
A government that sets out to abolish market prices is inevitably driven toward the abolition of private property; it has to recognize that there is no middle way between the system of private property in the means of production combined with free contract, and the system of common ownership of the means of production, or socialism. It is gradually forced toward compulsory production, universal obligation to labor, rationing of consumption, and, finally, official regulation of the whole of production and consumption.

Ludwig Von Mises

 

On a national scale, there are three groups of spenders -- consumers, corporations, and the government, right? Consumers spent well beyond their means in the years leading up to the recession, so as a whole, they have to spend less, save more and pay off debt. Corporations have massive amounts of cash on hand but are unwilling to spend it because consumer confidence is down and unemployment is up, so demand for their products is questionable. Would you make the decision to build a new manufacturing plant in this type of environment? So both consumer and corporate spending are weak. Every dollar earned is a dollar that was spent by someone else. So we can resign ourselves to the deepest, longest recession/depression possible -- or the government can step in and be "the spender of last resort" and attempt to stimulate growth. I agree with the general concept of government spending. I don't believe the government acted effectively in response to (and lack of anticipation of) this particular economic mess.

 

People who make these type of statements tend to think money, and the wealth it should represent originates from a printing press.
Government has no money(wealth) other than what it confiscates from its citizens.
What you are suggesting is that you can stand in a bucket and levitate by pulling on the handle, it won't work and it never has, the "spender of last resort" has been spending the money that does not belong to it on things we do not need or want. Funding projects that produce nothing in terms of real wealth by mortgaging the future always results in disaster.
Corporations have cash on hand because they don't spend more than they collect while generating real wealth, it is a beautiful and simple concept.

Government spending far beyond revenues confiscated created the "large mess" you speak of over decades, and somehow you think more spending will fix it?

I urge you to search your home for a single product manufactured by government or a single service that is not funded by productive citizens. Report back if you find one, I would love to see it.

 

Milton Friedman was in China studying their economy. He was visiting a large construction project, and noted that thousands of workers were using shovels, and asked his Chinese hosts why there were no bulldozers or backhoes in use.

The reply: “Using shovels creates more jobs.”

Milton Friedman’s classic response, “Why don’t they use teaspoons?”

 

Another possibility in the scenario you've described is that the individuals and corporations that currently have capital are unwilling to expose it to confiscation by the state. The "spender of last resort" only has the money they have removed from somewhere else in the economy.

The 'spender of last resort' is the polar opposite of King Midas--everything they touch turns into feces.

 

A couple of mild mannered defenses. I conclude that the Keynesians have been routed and have left the field.

WW

 

They will never leave the field, but at least Keynes could recognize himself in the mirror.


"Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back”
― John Maynard Keynes