GayPatriot

The Internet home for American gay conservatives.

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  3. V, great job capturing the talking point cliches of lefties.

    Like this one:

    Every economist says we need deficits in a recession to stimulate the economy.

    How many times have I heard that one! Of course it’s not true; many economists object to Obama’s deficit-spending policy. And how does *consuming* the nation’s savings in a debt-fueled consumption binge (which is what Obama’s deficits are) help us get out of a recession that was caused, not by an excess of savings, but by… the previous debt-fueled consumption binge? “Hair o’ the dog”, I guess – Lefties think like addicts.

  6. That conversation sure sounds familiar.

    ILC – you know more about macroeconomics than I do but stimulus spending seems to make some sense in theory – getting money moving (velocity?).

    My thought is that it’s been a utter failure because the money is spent to cover unsustainable expenses (e.g. superfluous gubmint employees, nonsense, boondoggles, and the like).

    If it were possible to spend the money efficiently on needed public assets, it might work (of course I’ve proved myself wrong with the words efficiently and needed).

  7. stimulus spending seems to make some sense in theory – getting money moving (velocity?)

    That’s the Keynesian theory. I have many comments explaining why I think Keynesian theory as such is false.

    If it were possible to spend the money efficiently on needed public assets, it might work

    It might be “less bad”. But government, especially in America, is never a bunch of Platonic Guardians making wise choices. Plato’s Republic, this place ain’t – and shouldn’t try to be, because the Platonic political ideal is tyrannous and therefore immoral, as has been discovered “the hard way” whenever it has been tried.

    At this point in the argument, some people like to cite the interstate highway system and NASA as positives example of government infrastructure spending. Wonderful – that’s about 1% of government spending over the decades. Nice work, 1% of the time. Further: the free enterprise system actually could have done those things better and cheaper, if only government had not chosen to stand actively in the way. Have government block free enterprise in some area, and then naturally it will seem like the government accomplished something, by its operations in that area.

    Another example people may cite is industrial policy: looked how well it worked out for Japan. Yeah. Look. They’ve had a zombie economy (no real growth) for 2 decades now, and are about to disappear off a demographic cliff.

    These examples all show that government economic planning may occasionally stumble into something halfway decent – by luck. But the free enterprise system, IF you can bring yourself to have actual property rights (or actual economic freedom) and let it operate, is more moral (because it does not involve forcing people, or seizing their asses) and for that reason, more reliably efficient and innovative.

    The Keynesian theory is, in simplest essence, that savings are bad. That’s what you mean by “getting money moving”. In the Keynesian theory, spending is the economy. Recessions happen because people are saving too much i.e. not spending enough, so money isn’t moving fast enough. Government should force people to spend – by either seizing (via taxes), borrowing or printing the money, and spending it. (Money-printing is another way to expropriate the purchasing power stored in savings; think of it as a hidden tax. The new money dilutes the existing money, i.e. dilutes the purchasing power of savings.)

    That theory should sound stupid – because it is. It ignores the crucial role of savings in production and trade. It is because a person or company has capital i.e. savings, that they can afford to innovate and to create jobs. If you are going to expropriate (or dilute) savings, then you undermine the country’s employment and production structure. Ultimately you destroy it, as they found in Zimbabwe.

    Austrian School economics is the fundamental alternative to Keynes, and it gets these issues right. Recessions happen because the country had undergone an artificial boom, a bubble-economy fueled by excessive credit/debt and excessive government “stimulus” – as a result of which, bad investments accumulated which must be liquidated. The best thing the country can do is allow the liquidations (failures) to happen and get the recession over with. Then it can grow again. Savings are part of the cure; they help get rid of the excess debt, and create the capital that will enable the recovery.

    It should be clear that the Austrian description is far more relevant to our situation today, than the Keynesian. Obama fails, *because* he refuses to accept the recession and tries to overcome it with Keynesian, anti-freedom, Big Government / big spending policies. His policies are the very thing *causing* his lack of recovery from the 2008 recession.

    So it was in the Great Depression: the Big Government policies of Roosevelt (and earlier, Hoover) were the very things that caused the Depression to drag on so long, i.e. that caused recovery and job growth and industrial innovation never to come. Meanwhile, Harding dealt with the Depression of 1920 in a small-government way – he cut taxes, cut spending, cut deficits – and the economy boomed within two years. Likewise, Reagan and Thatcher in the 1980s at least reduced the growth of government (even if they couldn’t quite cut it outright) – and saw booms, as Austrian theory predicted they would.

  8. LOL sorry, meant to say at paragraph 5 that the free enterprise system “does not involve forcing people, or seizing their asse*t*s”. Assets, not asses 🙂

  9. Thanks, ILC. I would say that without consumption (spending), savings would yield little and there’d be no need for business to expand and hire.

    I suppose the key is to let the market decide balance between savings and spending – free from government interference (as much as is possible). The current mess, here and abroad, illustrates vividly what happens when central planners get it wrong.

  18. I would say that without consumption (spending), savings would yield little and there’d be no need for business to expand and hire.

    Again, a classic Keynesian belief and one I know to be untrue. There will always be consumption. Human need is infinite. People always need and want more things. And, *if* we have free markets not central planning, then markets for products and services will always clear: what is produced, will always be sold to someone somewhere, at some price.

    And savings “yield little” *right now*, with the Fed artificially forcing interest rates down to 0%. If you truly fear savings yielding little and businesses having no need to expand and hire, then look at the world around you *today* – the world produced by Obama and Keynesianism.

  19. (continued) In other words, savings are yielding little and businesses are doing little hiring – *with* high “stimulus” in place, and ongoing high consumption/spending. Is it working? What’s it getting us?

    Conversely, in the old Soviet Union, they had so much demand and focus on consumption that the people stood all day in lines that snaked around city blocks for a chance to spend their money – and it didn’t improve their economy or living standard a bit.

    So the beliefs that there could ever be an economically insufficient degree of consumption under free markets, that consumption/spending accordingly require “stimulus”, and that such “stimulus” is not harmful to the rest of the economy, are all silly. Its advocates push the beliefs because their real desire is Big Government, redistributionism and money printing – with them among the hoped-for beneficiaries.

  20. I suppose the key is to let the market decide balance between savings and spending – free from government interference (as much as is possible).

    Yes – now you’re talking.

  21. (continued) Austrian theory accounts for it as well. A key determinant-and-expression of the balance between saving and spending is the real interest rate (the interest rate after inflation). If it gets high, people save more (or consume less) and entrepreneurs borrow less, which pushes the rate down. If it gets low, people save less (or consume more) and entrepreneurs borrow more, which pushes the rate up.

    As the rate changes, it maintains the economy’s balance. If people suddenly *want* to save less (consume more) and/or if entrepreneurs *want* to borrow more: they can get away with it for awhile, but the rising rate will eventually correct them. Likewise if people suddenly want to save more (consume less) and/or if entrepreneurs want to borrow less: they can get away with it for awhile, but the falling rate will eventually correct them.

    Now government (or Fed) steps in and says: We are going to force low rates, to finance government spending and to force people to consume and speculate, which boosts the GDP statistics. What do you get? A fake, bubble economy. A debt-fueled consumption binge. A NASDAQ bubble, say, or a housing bubble, or (today) a bubble in bonds or commodities. When the bubble bursts, its gains are more than wiped out. The binge is always followed by a hangover. The piper must always be paid.

    And the solution is: man up and pay the piper. Keep government out of the way; let bad investments fail; let interest rates rise if the market wants, so that debts are paid down and new capital is formed. After a period of adjustment – and the less government interference, the shorter the period – the economy resumes healthy growth on its own. That is what Roosevelt would not allow to happen in the Great Depression, and what Obama is not allowing now.