Posted on 01/23/2009 5:25:35 PM PST by neverdem
In a few weeks, Congress will likely enact the largest fiscal stimulus legislation in history. Surprisingly, the whole idea of such a stimulus is much more controversial among A-list economists than I would have expected, given the depth and breadth of the economic malaise. Although the debate is rather technical, it's important to try to understand it because much is at stake.
Eighty years ago, the conventional view among economists was that government had nothing to do with business cycles--it neither caused them nor was there anything it could do about them. They were like the weather; you just coped the best you could.
Eventually, economists came to understand that vast numbers of individuals and businesses throughout the economy don't make exactly the same mistakes simultaneously unless something has changed the rules of the game. Government isn't always responsible--bubbles can occur on their own, as they have over the centuries--but systemic errors usually result from government policy.
The Federal Reserve, our nation's central bank, is the institution mainly responsible for altering the terms of trade. That is because it has the power to change the value of the currency, which is the intermediary in every single economic transaction, and also to alter the terms of every intertemporal transaction--those between the present and future, such as saving today to consume tomorrow--by raising or lowering the interest rate.
No one today believes that the Great Depression just happened or dragged on as long as it did because the private sector kept making mistake after mistake after mistake. It only made them and continued to do so because government interfered with the normal operations of the market and prevented readjustment from taking place.
The Great Depression resulted from a confluence of governmental errors--the Fed was too easy for too long in the 1920s, tightened too much in...
(Excerpt) Read more at forbes.com ...
Short of paying people to dig holes and then fill them in...government does not create jobs nor wealth.....
Not for White Construction workers apparantly.
Juan Williams said it is "proven" that it works.....
My question is how can you have taxpayer funded bailouts and tax cuts at the same time?
Does Stimulus Stimulate? I don’t know the answer to that queastion.I do know that nothing exceeds like excess,and that’s what”s happening in Washington these days.
Does stimulus stimulate when total debt is 360% of GDP? It seems to me that at some point, total debt becomes so large that it has to be reduced. Numbers only grow to infinity in mathematics. At some point, arguing about increasing debt with tax cuts or increasing debt with new spending is a moot point. Are we at that point?
I don't think it is possible to do both at once. I also think bailouts and "stimulus" do not work. They cost the economy more than they put back. The only way for this to be untrue is to print money.
Tax cuts leave 100% of cut-tax money in the economy, not the small percentage that the government gives back out as a bailout or stimulus. The effect is greater and does not slow the economy down to pay for it.
I don't know, but government spending does nothing to help the economy grow and pay off debt. It only increases the debt.
Stimulus package MA! What is being proposed is the largest assemblage of pork in the history of mankind.
read my signature....
read my signature....
...which costs the economy even more.
Which creates more "need" for "stimulus" and "bailouts".
The government giving out the money is a death spiral.
Reducing taxes and letting the economy grow itself is the only way out that will not leave us like the USSR with long lines for the empty meat cooler at the grocery store.
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