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Demand side economics debunked
Examiner ^ | 24 Aug 11 | Dan Poole

Posted on 09/03/2011 7:04:42 AM PDT by 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.

(Excerpt) Read more at examiner.com ...


TOPICS: Editorial; News/Current Events
KEYWORDS: demandsideeconomics; leach; obamanomics

1 posted on 09/03/2011 7:04:47 AM PDT by xzins
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To: xzins

Keynesian economics has been pure hokum from the start and nothing has changed! It is STILL hokum!


2 posted on 09/03/2011 7:10:18 AM PDT by Bigun ("The most fearsome words in the English language are I'm from the government and I'm here to help!")
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To: All; P-Marlowe; wmfights
I absolutely loved this in point #4 of the article about the claim that a dollar spent by the government generates up to $1.75 in economic activity:

Taking this claim to its logical extreme, the government should spend $999 trillion on food stamps, unemployment insurance, etc, that way well over a quadrillion dollars in economic stimulus is generated.

Hell, Detroit could be fixed in one fell swoop just by giving billions of dollars in food stamps and unemployment insurance to everyone!

Progressives might respond by saying “well, uh, food stamps and UI only stimulate the economy like that as long as there are 130 million other Americans working.”

But doesn't the government decide then who works and who gets to receive unemployment benefits and food stamps?

Why should I have to work 10 hours a day so I can pay for my college education when some bozo in Detroit is getting all those government free-bees at my expense?


3 posted on 09/03/2011 7:11:32 AM PDT by xzins (Retired Army Chaplain and Proud of It! True Supporters of our Troops PRAY for their VICTORY!)
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To: xzins

It is not O’s policy. It is the entire left ideology and academia who venture into power from the cozy classroom is the total failure. We can let it get blamed on one guy or the next leftist will just surface we have to include the entire ideology and belief to kill the beast.


4 posted on 09/03/2011 7:12:00 AM PDT by edcoil (The will to win is important, but the will to prepare is vital. -- Joe Paterno)
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To: edcoil

demand-side has been debunked again and again, but it continues. Why?

Because it enables those in power to distribute huge sums of money to their power group. In the final result, they don’t mind getting kicked out of power, because in the meantime, they have been enormously enriched by having had access to the government checkbook.

It also sets up a possible revolution in which they can re-initiate an aristocracy....otherwise known as “a dictatorship of the proletariat.”


5 posted on 09/03/2011 7:16:38 AM PDT by xzins (Retired Army Chaplain and Proud of It! True Supporters of our Troops PRAY for their VICTORY!)
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To: Bigun
Keynesian economics can work, but not in the way it was used by Obama and Pelosi. First of all, it needs the money multiplier to be significantly greater than 1 (and it was less than 1.0 when the Porkulus was passed, and is still falling). Secondly, Keynes wanted the stimulus money to go to stimulating the productive private part of the economy, not to be used to keep non-productive bureaucrats employed.

However, the fact that the money multiplier needs to be reasonably high makes it of limited value during a Great Recession.....

6 posted on 09/03/2011 7:42:19 AM PDT by expatpat
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To: expatpat
However, the fact that the money multiplier needs to be reasonably high makes it of limited value during a Great Recession.....

And if it is not workable in that circumstance of what value is it?

7 posted on 09/03/2011 7:46:29 AM PDT by Bigun ("The most fearsome words in the English language are I'm from the government and I'm here to help!")
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To: xzins

Obama’s policies haven’t even risen to the level of Keynes. He has squandered trillions paying political parasites to do nothing.


8 posted on 09/03/2011 7:49:32 AM PDT by freedomfiter2 (Brutal acts of commission and yawning acts of omission both strengthen the hand of the devil.)
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To: freedomfiter2

I agree to a degree. There is no doubt that Obama has mixed Keynesianist ideas with crony capitalism, crony socialism, and crony bureaucracism. In other words, the money was spend on his friends and favorites.

For those who don’t recognize it, that is the HEART of national socialism. See Benito Mussolini.


9 posted on 09/03/2011 7:58:19 AM PDT by xzins (Retired Army Chaplain and Proud of It! True Supporters of our Troops PRAY for their VICTORY!)
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To: xzins

Demand side economics in a democracy is nothing less than Bribe-Side economics. You take money from people who don’t vote for you and give it to people who do vote for you. Eventually you buy yourself permanent power.


10 posted on 09/03/2011 8:09:54 AM PDT by P-Marlowe (LPFOKETT GAHCOEEP-w/o*)
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To: P-Marlowe

Tax Cuts for the Rich should be answered with “Tax Increases for the Cronies”


11 posted on 09/03/2011 8:17:32 AM PDT by xzins (Retired Army Chaplain and Proud of It! True Supporters of our Troops PRAY for their VICTORY!)
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To: Bigun

That’s the point I made.


12 posted on 09/03/2011 8:33:07 AM PDT by expatpat
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To: expatpat
Keynesian economics can work,

Keynesians claim that increased consumer spending equals economic growth. It doesn't.

Economic growth is capital growth and Keynesian policies result in the consumption of capital through monetary inflation, increased taxation, government borrowing and poorly-chosen investments made only because interest rates were artificially low.

So, if by "works", you mean consumer spending increases. Then, yes, in some cases it does. But that is still not economic growth. So what good is it?

13 posted on 09/03/2011 9:00:28 AM PDT by BfloGuy (Keynesians take the stand that the best way to sober up is more booze.)
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bttt


14 posted on 09/03/2011 9:00:33 AM PDT by Matchett-PI (Obamageddon, Barackalypse Now! Bam is "Debt Man Walking" in 2012 - Rush Limbaugh)
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To: xzins
I absolutely loved this in point #4 of the article about the claim that a dollar spent by the government generates up to $1.75 in economic activity:

Taking this claim to its logical extreme, the government should spend $999 trillion on food stamps, unemployment insurance, etc, that way well over a quadrillion dollars in economic stimulus is generated.

Yes! And we can't forget that to pay back the $1.00 in spending, we need $5.00 in "economic activity" (based on government taking about 20%).

15 posted on 09/03/2011 9:19:41 AM PDT by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: xzins

The main problem with the Keynesian paradigm is that it assigns economic value to things that have none. Only goods production and services with global tradeable value should be included as “product” in GDP calculations. Services that actually do increase economic efficiency already show up as gains in goods production, and should not be double-counted as end product (same for gov’t). That’s why the paradox of the last decade where GDP appeared to be increasing as household wealth decreased.

Did production in the US actually increase over the past 10 years? Not on your life. And realistically, we’ve been in a production recession more or less continually since 2001.


16 posted on 09/03/2011 9:19:57 AM PDT by CowboyJay ("Rick Perry has more red flags than a May Day parade." - fieldmarshalj)
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To: CowboyJay; Toddsterpatriot

Interestingly, the Bible says that it is God “who gives the ability to create wealth.”

In short, if it isn’t a product derived in some way from the earth, the sea, or the sky, then it is a service that works at distributing those products.

The products are wealth. If we bringing products into being from basic materials, then we are not creating wealth.

A government job stamping papers is neither creating nor servicing the distribution of products.


17 posted on 09/03/2011 9:48:14 AM PDT by xzins (Retired Army Chaplain and Proud of It! True Supporters of our Troops PRAY for their VICTORY!)
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To: Bigun
Keynesian economics has been pure hokum from the start and nothing has changed! It is STILL hokum!

Yep, Snake oil! It must have been developed by the greatest liar in the world. Yeah, we are going to...overspend our deficit because...it is good for the economy...yeah, that's the ticket.

18 posted on 09/03/2011 10:30:05 AM PDT by VRW Conspirator (Obama takes office, and 2-1/2 years later we are saying downgrade and America together!)
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To: xzins

Actually this writer is quite confused. Demand side economics is not the same as Keynesian economics. Demand side economics is the opposite of supply side economics. 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. If supply side worked, garbage and criminals would be in great demand and would be considered valuable. No one is demanding garbage or crime however, so the value is low to negative. All markets worldwide function on demand. If you have no buyers, you won’t sell.


19 posted on 09/03/2011 10:35:45 AM PDT by trailboss800
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To: xzins
Interestingly, the Bible says that it is God “who gives the ability to create wealth.”

In short, if it isn’t a product derived in some way from the earth, the sea, or the sky, then it is a service that works at distributing those products.

God also gives the ability to provide services.

I can think of many services that don't involve distributing products.

20 posted on 09/03/2011 10:44:54 AM PDT by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: trailboss800
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.

21 posted on 09/03/2011 10:53:24 AM PDT by Yardstick
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To: trailboss800

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


22 posted on 09/03/2011 11:29:46 AM PDT by xzins (Retired Army Chaplain and Proud of It! True Supporters of our Troops PRAY for their VICTORY!)
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To: trailboss800
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?

23 posted on 09/03/2011 11:38:31 AM PDT by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: xzins

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.


24 posted on 09/03/2011 11:40:53 AM PDT by csmusaret (The only borders Obama has closed is a bookstore.)
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To: csmusaret

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.


25 posted on 09/04/2011 12:21:38 AM PDT by DB
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To: 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.

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

26 posted on 09/04/2011 6:29:26 AM PDT by Bigun ("The most fearsome words in the English language are I'm from the government and I'm here to help!")
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