[massadvj]

I am one of the businessmen of whom he speaks, and he is not entirely wrong. Naturally, the best scenario is for government to cut and not spend. But given a choice between a tax and spend or a borrow and spend policy, the tax and spend policy is probably better for the economy over the long term. Here's why:

Borrow and spend will stimulate the economy over the short term by flooding it with cash. Everyone understands that. So everything will temporarily improve as more money chases fewer products. But speculatiors like me also see that over the longer term this is going to have the effect of causing inflation, low confidence in the currency, lower relative buying buyer on a global basis. So how will I hedge that? I'll buy gold, hard assets such as investment grade art and antiques, residential income-generating real estate leveraged with artificially low interest rates, foreign currencies, and speculate in stocks to capture the artificial bubble that will be created (always at the ready to bail on the first sign of inflation and increasing interest rates). What I won't do is take on fixed costs for my business, hire employees, or otherwise make long-term plans that may be more beneficial for society.

If the government's books are balanced, I will more likely take a long-term view in the expectation of a stable business environment. I will expand my business, take on more employees, etc. From a societal point f view, it's probably better for me to do this.

The ideal, of course, is for government to cut spending and taxes. But given the choice between tax and spend democrats and borrow and spend neocon republicans, the tax and spend approach is probably the better at maintaining a stable economy over the long run. The borrow and spend approach may kick-start a sluggish economy, but when you look at the spending -- farm subsidies, prescription drugs, education, etc -- you see that it cannot be reversed after the economy starts humming again. So you have to assume that the deficits are going to be as long-term as the new spending. Which of course means that government will be borrowing or printing money into the future.

Republicans used to understand all this. Remember when we supported a balanced budget amendment? It seems so long ago now.

Personally, though, I prefer borrow and spend. As a speculator, it's easier to predict what will happen next and you can build greater wealth over a shorter period without losing flexibility.

[WOSG]

sorry but you have it backwards.

Economically, borrowing is better than taxing. You fail to account in your story for the increased economic inventive of the lower rates, which yield higher revenue over time than higher rates. Reducing cost of govt through lower taxes yields higher growth which lowers the future burden of govt. excessive borrowing cannot be sustained, but it is almost never a bad idea to cut taxes. moreover, the tax cuts correspond over time with spending cuts.