It's easy to explain: GDP=C+I+x+G where C is consumer spending on goods and services, I is capital investment, X is net exports (exports minus imports..currently negative) and G government spending. Liberals follow the idea from John Maynard Keynes that increasing government spending creates an economic multiplier...one dollar of new spending yields more than one dollar in economic activity. This has two problems..Keynes himself said the economic multiplier could be zero and evidence that it exists in the way liberals want is nebulous at best. The source of the government spending has also to be considered. Governments get their money from either taxation or borrowing. Increasing taxes decreases Consumption as consumption is based on after tax disposable income. Borrowing creates a crowding out effect diverting investment from capital expansion to the purchase of government debt. If there is no economic multiplier then increased government spending decreases GDP. Putting more money into the hands of consumers by reducing taxes drives aggregate demand and spurs economic expansion and thus raises GDP. This video
debunks Keynes multiplier.
To: The Great RJ
I like that. And why is Bill giving Republicans advice?
posted on 03/28/2013 6:47:42 PM PDT
by Son House
(The Heath Care Recovery Never Gets Here, Like The Economic Recovery, Easily Predictable.)
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