Posted on 08/08/2011 11:57:23 AM PDT by central_va
The Case for MORE Spending to Prevent a Recession By Matt Nesto | Breakout – 3 hours ago
It took Jimmy Buffett three verses to admit it in Margaritaville, but even he figured it out eventually. "Some people claim that there's a woman to blame, But I know, it's my own damn fault." Get the idea?
Dean Baker sure does. He's the Co-Director of the Center for Economic and Policy Research, and a believer of the theory that we are our own worst enemy when it comes to getting the country back on its feet, financially speaking.
"We're worsening the economy," Baker says. "The government was helping originally with President Obama's stimulus package but it wasn't big enough and now most of that has faded out, so most of the spending has already taken place." And even though we have very little to show for all that spending, this PhD in economics from the University of Michigan thinks we have no choice but to spend even more. He says the country is fixated on reducing the deficit when we should be consumed with creating jobs and boosting the economy. He figures the combined effect of state, local, and now Federal spending cutbacks amounts to roughly a 1% drag on GDP.
And even though our Federal Reserve Chairman Ben Bernanke is an expert in the great depression, Baker says we are about to make the same mistake FDR did 75-years ago. "The unemployment rate when President Roosevelt came in was 25%," Baker says, and with the help of several unprecedented works projects, FDR "go it down to 10%." And then the historical parallel/warning.
(Excerpt) Read more at finance.yahoo.com ...
Truthfully, yes, you can have a good effect by spending to get yourself out of a recession. When you’re spending 12% of the GDP in deficit, you’re merely covering up the long lasting depression.
If, for example, the 99er’s out there spent those 1.5 years in job training, learning new skills, improving old ones, that money would have been well spent. Instead, it was simply blown in the wind, and made no lasting contribution to the GDP.
Over and over again, we simply give people fish, when we should be teaching them how to find their own fishing hole, how to bait a line, and how to skin and cook it after.
If you’re morbidly obese, let’s say 800 lbs, what you need is more donuts, ice cream, chips and cookies. Going on a diet would be crazy. It would guarantee packing on even more blubber. So, whatever you do, do NOT go on a diet.
GDP has grown about $1T/yr for 15 years (ignoring the first-ever outright downturn under the Obama).
Federal revenue is always 15-20% of GDP. No scheme will net more than that, as the economy would slow accordingly to maintain that equilibrium. We’re about 18% now.
Realistic optimism maxes out at doubling GDP growth rate to $2T/yr, and squeezing at most another 2 points out of it into revenue. Any hope of revenue enhancement beyond that is delusional.
Ergo, we’re not going to see revenue increase more than $0.4T/yr. Period.
More Keynesian clap-trap.
I’d be all for SPENDING MORE on thing like infrastructure, R&D, and weapons systems if we cut programs like: Headstart, SSI, Foodstamps, etc, etc, etc. I think we spend enough as a country, but we spend it on the wrong things. We spend it on programs that encourage sloth and stupidity, rather than on things which will make us stronger and sharper. What you get subsidize, you are guaranteed to get more of.
I think there should be a corollary to his quote:
'Those who do not understand the past are condemned to repeat it.'
Clearly, this man does not understand what happened under FDR.
It’s a tough job but somebody has to do it.
Most economists are crazy. They think you can take money away from folks who build businesses and create jobs, give it to the parasite classes to spend, and that will “stimulate” economy.
For the majority of economists, the REAL WORLD is always a “special case”.
We’re broke, so necessarily more spending=more debt. Hardly a solution.
Keynesian stimulus theories seem to rely on consumers and businesses having blinders on about where the “free” government money is coming from. But people are now paying enough attention so that an extra trillion dollars of stimulus would be seen by people as even more wasteful than the last trillion (so jungles in Nebraska didn’t work... how about a jungle in Alaska) and would add another trillion plus interest to the debt. Any stimulus would be more than balanced by an economic suppression from people looking at that debt and saying “It’s time to stop buying those fancy canned beans for beans and rice. We’ll eat rehydrated dried beans instead and save for the economic worse times coming soon.”
1) How does increasing the debt (with the threat of current or future taxes on small business owners) astronomically ever encourage the private sector to hire? Or do we just run deficits >1/2 GDP forever? Where's your exit strategy?
2) If very expensive Stimulus-government funded type jobs are the only solution to economic downturns then what options do you leave the country in the future with 10s of trillions of debt and unfunded liabilities??
Short term cutting spending will increase unemployment temporally, but it has to happen sooner than later.
Programs and cabinet departments need a Sunset, with the attendant RIF of civil servants.
WE KNOW WHAT WORKS AND obama HAS PROVED FOR ALL TIME THAT A GOVERNMENT CANNOT SPEND ITS WAY TO PROSPERSITY... IT KILLS ALL PROSPERITY. SMALL GOVERNMENT AND LARGE PERSONAL LIBERTY IS OUR ONLY SALVATION... ANYONE STATING OTHERWISE IS A CRIMINAL... INSANE... OR BOTH.
LLS
I’ve been telling everyone for months that the Democrats have spending bill sitting committee waiting to go the minute that the debt level was increased.
Start with Patty Murray’s S.947 on GovTrack, and go related legislation. They used have a page with related bills, now they have a whole page with related topics for bills that lead to whole pages.
Here’s the list of topic containing related spending legislation:
Government lending and loan guarantees
Infrastructure development
Intergovernmental relations
Licensing and registrations
Navigation, waterways, harbors
Public transit
Railroads
Roads and highways
Rural conditions and development
State and local finance
Transportation and public works
Transportation programs funding
They ask me why I drink....
LOL!
Well, doesn’t Obama say tax cuts are ‘government spending’... spend away!
I understand completely.
LLS
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