Demand side economics debunked

Examiner ^ | 24 Aug 11 | Dan Poole

[xzins]

It doesn’t take a rocket scientist, or in this case, an economist, to plainly see that President Barack Obama’s economic policies have been a total failure.....

Demand side economics has been one of the bedrock principles of Progressive economic though in America ever since Franklin Delano Roosevelt first tried it in the 1930s.

Also known as Keynesianism, demand side economics asserts that recessions in the market economy can only be fixed by artificially increasing demand for goods and services.....

According to Progressives, the "unethical" refusal of the private sector to spend as much money as it did during normal economic times necessitates the government spending hundreds of billions, even trillions, of dollars in order to return demand to normal levels and “jolt” the economy back to life.

Hence why Obama’s Agriculture Secretary, Tom Vilsack, claimed recently that food stamps are “the most direct stimulus you can get in the economy during these tough times.”

While demand side economics sounds like a sexy idea in theory, it completely fails in practice for several reasons.

1. Assuming that the obscene amount of money spent by the government in order to artificially boost demand comes from tax revenue, than all the government is doing is redistributing wealth from one sector of the economy to another. No new demand is created, and no net stimulus is generated.

2. Progressives falsely believe that immediate spending effectively replaces “idle savings” and thus provides a boost to the economy:

The problem with this reasoning, however, is deficit spending means more government borrowing which means less capital is available to the private sector.

[Yardstick]

If supply side worked, garbage and criminals would be in great demand and would be considered valuable.

Oh wow, I'll bet the supply siders have never thought of this angle before. Their theory is clearly doomed.

[xzins]

The Heritage Foundation paper linked to early in this article also says the Keynesian theory is based on demand.

[Toddsterpatriot]

Demand theory states that if something is being demanded, a supplier will come forward and a mutual price will be agreed on. Supply side econ states that if you produce enough of something, it will eventually be demanded.

That's a unique definition, did you make it up yourself?

[csmusaret]

Demand side economics could work if the government were spending a surplus, but when it has to borrow in order to spend, it is destined to fail. Government borrowing sucks investment capital out of the economy in order to pour stimulus money into the economy. This is just as effective as dipping water out of the deep end of a swimming pool and pouring it into the shallow end in order to raise the overall level of water in the pool.

[DB]

If they had a surplus then they were taking too much out of the private sector and simply should reduce taxes. That would do more than anything else they could do.

[Bigun]

If they had a surplus then they were taking too much out of the private sector and simply should reduce taxes. That would do more than anything else they could do.

Of course it would! But they don't get to do their social engineering that way!