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Permalink Reply by Ben Waller on June 9, 2011 at 7:25pm

The problem is that if deficit spending doesn't bring back the economy (it's not) then all the deficit spending does is to make sure that when the real pain hits it will be much, much worse than if the government simply lives within its means.

As for your comments on FDR and Keynes, I disagree and we probably won't ever agree.

The fact that we can afford a little more debt "at the moment" doesn't make debt a great idea. Then again, if you want to start making my mortgage payments for me, I guess you having a little more debt is a good thing after all.

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Permalink Reply by Ben Waller on June 9, 2011 at 7:39pm

Also remember that there's a critical defect with Keynesian economics - you eventually run out of other people's money to spend.

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Permalink Reply by Mark Oomkes on June 10, 2011 at 4:21pm

when the economy hits the dumper, you get it moving by going into debt.

So, when your pay is cut from your job or your wife's, do you go further into debt to get yourself out of the reduced income issue?

You lose your job, do you go buy a new car, house, TV, appliances?

Keynes theory is so flawed it isn't funny. The problem being, gov't doesn't really have anything, except it comes from the taxpayer. There isn't even a gov't if not for the taxpayer.

Sure, they can print money (the feds can, states and locals are SOL) but that doesn't work so well either.

There has never been a case of trickle-down economics ever working.

Then why did Bush 2 and Bush 3 (Obama) go ahead with the stimulus? The stimulus is a form of trickle down, public trickle down, not from the private sector trickle down.

So the only difference between Keynes and supply side is who is spending the money, and as Ben stated, eventually the gov't runs out of taxpayer dollars to spend.......or continues to print it with disastrous results.

We can afford more debt? Seriously? You owe for a house, car, appliances, TV, food and you would take on more debt?

Debt is what the problem is, you know the saying "Cash is king", don't you?

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Permalink Reply by Richard Dawson on June 11, 2011 at 9:25pm

I see one HUGE drain on the federal budget. http://www.congresslink.org/print_basics_pay.htm
What are these lawmakers doing to get these pay rates and all of the "perks" that go along with their office? Do these elected officials pay for their own medical expenses? Travel? Meals? Ya know, the things we "regular" people pay out of our own pockets? I would like to get a 5% annual pay raise just for serving my country for almost 20 years. I will be getting the same money next year if Congress and Senate decide to freeze VA disability pay. With all of the money going to the lawmakers, how many rural fire departments could get new(er) equipment and training for , let's say, 30% of ONE Senators annual pay? It may not be a huge amount of money for the government, but $175,000 would do wonders for my department each year. Multiply that by the number of members of the Senate and Congress, and I see lots of our tax dollars going to people that really don't care if there are emergency services in their constituents' communities...

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Permalink Reply by Vic Silverfish on June 11, 2011 at 11:51pm

Mark, what Keynes says is basically "put money in th hands of people who will spend it." This is not trickle-down, if anything you could describe it as "trickle-up." The intent of the stimulous was to puut money in the hands of people who will spend it (construction workers, public sector employees, etc). Those salaries would then be spent on other goods, creating even more economic activity.

I'm not sure what you are reccomending regarding debt during lean times. If you lose you're job, do you stop eating, or do you put your groceries on your credit card so you can still make your house payment? If I can easily support payments on my debts, I would definately consider borrowing more if the situation called for it. Look to the bond market and inflation, both of which indicate that the Fed can afford more debt.

The goal is to use debt to prevent a catastrophe. The stimulous ended up being a) too small and b) way to much in tax cuts for the rich (which were the only way it would pass) so it has not worked as well as it could have. We have stopped hemmoraging jobs like we were in 2008, but we aren't adding them as fast as we need to. In a consumer-driven economy like America, I would think that getting people spending would be the solution. Giving more money to the Donald Trumps of the world hardly does that.

Here's a chart showing jobs lost/added to the economy, I've marked where the Recovery Act was passed. You can see it worked (we have not lost jobs at the same rate) but not well enough.

Attachments:

• privatejobs_mar11 reco act.jpg, 36 KB

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Permalink Reply by Ben Waller on June 12, 2011 at 5:32am

Two problems with that...

1) The method by which getting money into the hands of those who spend it has to be based on a sustainable way to get the money into those hands. That means private-sector jobs, since the private sector is the only place that wealth can be created by choice. The only way to use public sector money is to take it from someone else.

There is one exception to this that I can think of - public/private partnerships. This can be for things like franchised public services like transportation, public works, and trash collection where the public entity grants a franchise to provide the service and the private entity has the motivation to create the jobs to provide the service efficiently and thus creates both jobs and private sector wealth. The same goes for university research partnered with a public sector manufacturer such as the Clemson University/Michelin/NASCAR research facility in Greenville, SC.

2) The debt created will eventually pass the point of diminishing returns if job losses and/or a recession goes on long enough or if it is severe enough. When so much of the GNP is tied up simply paying the interest on previous debt, it reduces the real buying power of every dollar - public or private.

As for the Recovery Act chart, if it didn't work "well enough", then it didn't work. Claiming that it worked, but not well enough is similar to the woman who claims to be "a little bit pregnant".

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Permalink Reply by Ben Waller on June 12, 2011 at 4:19pm

The Clemson University public/private partnership goes by the name CU/Intenational Center for Automotive Research (ICAR) and is a good example of how a public-private partnership works.

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