Quote:
Originally Posted by aceventura3
Are you saying the point is for us to fool ourselves? Why even waste time with something that will have negative consequences in the future, why not take our lumps and pay the price for lasting sustained growth? If what you believe is shared by the folks in Washington, then I agree with McCain - "generational theft". We should do what we know will work - long-term.
The government can grow the M1 money supply by going into the market and simply buying back government bonds, notes, and T-Bills. The opposite of deficit spending. Oh, but one problem is that China holds so much of our debt and they may not want to spend their dollars in the US economy. Gee, we are in a endless negative cycle. At some point we have to pay the price.
They could also give back tax dollars to people who pay taxes, but we know that is not going to happen but let's give more money to failing banks, auto companies, home owners, and state governments like California. Screw those doing the right thing and those who can actually have a positive impact on economic growth.
---------- Post added at 05:24 PM ---------- Previous post was at 05:14 PM ----------
Another problem with deficit spending is that often governments, and I bet NPR did not discuss this, sucks the energy (capital/resources/opportunity) from the private sector. an example from our Depression during the 30's
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I dont think you got what I was saying. The point is not to "fool" ourselves, but to provide growth during a recession. Then as the economy pulls out of it, you can cut spending.
Now, as far as the money supply goes, the m1 fetish is severely outdated. Interest rates matter more nowadays than targeted money supply, and we are already at 0.
It is not generational theft, as I pointed out that there is a net social profit from that spending.
In any case, it is damn dishonest for McCain to talk shit like that after he approved the last 8 years of deficit spending. Specially when the republican response is "more tax cuts." Bush already generated 32 trillion dollars in unfunded liabilities for the next generation, and McCain was right there with him.
And with regards to the great depression, people might argue about the role of govt. spending, but virtually every economist saw at least some usefulness in at least part of the new deal. Not that everything was great, but there were a great many programs that helped.
And with regards to the current situation, only the republican faithful see no role for fiscal stimulus. When even Greg Mankiw, Posner, and Gary Beck see a role for fiscal stimulus (although they disagree with the democrats on the shape of the stimulus), you know it is needed.