Forum Post: Federal Spending: Killing the Economy With Government Stimulus By Forbes 08/06/2012
Posted 13 years ago on Aug. 8, 2012, 12:16 a.m. EST by SteveKJR
(-497)
This content is user submitted and not an official statement
This article was written by Forbs 08/06/2012 - Here are some exerpts and the link is below. This article covers spending that goes back to the Great Depression.
Similar was the result of a 2011 study from the Phoenix Center for Advanced Legal & Economic Public Policy Studies.
The four authors found: “government spending has zero effect on private-sector job creation. This result is consistent with the apparent impotence of huge federal government spending increases in recent times aimed at reducing unemployment.”
Moreover, contrary to myth, World War II did not end the Depression. As economist Robert Higgs has well-documented, war-time prosperity was an illusion, with non-government GDP growth slowing.
“During the war years the economy operated essentially as a command economy,” he wrote, with few “normal measures of macroeconomic performance.” After all, the government conscripted 16 million men into uniform and directed much of America’s economic activity into war production.
There was little change in total national wealth. Arthur Herman, a visiting scholar at the American Enterprise Institute, pointed out that “Even with rising wages, they had to put up with rationing and very limited choice in consumer goods.”
Ironically, it was the end of this wartime “stimulus spending”—which Herman figured at $3 trillion in today’s dollars—which led to economic growth. At the time people feared that Washington slashing arms production and demobilizing military personnel would lead to another depression.
However, he observed, “private investment came roaring back, triggering steady economic growth that pushed the U.S. into a new ear, as the most prosperous society in history.” Added Herman, “the biggest trigger to growth turns out to have been a sharp rise in private capital investment, which the New Deal had slowed.”
Here is the link 08/06/2012
Hmmm, so if the government handed out a contract to build a bridge, a contractor was used, who hired say 1,000 union iron workers to build (or repair) the bridge, let's assume the contractor was sucking wind (for lack of work), and the union workers were unemployed (as many are). Now let's assume those newly hired union workers are paying taxes instead of collecting unemployment. Also assume they use all that extra money to buy stuff. Assume all those people they buy stuff from will also be enriched. Someone has to produce that stuff, people have to work in the stores that sell that stuff, etc. Now multiply this by several thousand, or tens of thousands, or hundreds of thousands, or millions.
Or, let's assume some money went to states, who used it to rehire laid off teachers and firefighters. Thousands of teachers and firefighters are back on the job, they'll now be able to buy stuff.. and so on.
Of course the post war economy boomed, but not for the absurd reasons postulated by this mountain of revisionist gibberish. The rest of the world was in rubble, their factories destroyed, their food production capacity severely diminished, cities were in ruin, but nahhhh, this couldn't have had anything to do with it (duh). Suddenly, the United States was the only industrialized nation with its manufacturing infrastructure still standing. The Marshal Plan, European (and Asian) reliance on US exports, the GI Bill, government home loan programs responsible for the development of what we now call the suburbs, etc. Nahhh, none of that had anything to do with it (it's the magical world of conservative economics, oops, I mean, gibber-nomics).
Good god, what a dip shit. Oh no it's the calculus monster, with his friend evolution, hide the children.
Oh wait, it's a history book with real facts, Texas ... fix that would you :)
congrats I think you just coined it - like it "gibber-nomics" very nice but I think one thing in a stimulus you have to take care in - is who is bribing the government to get those chunks of stimulus - anytime there is government money to have - corruptorations are usually first in line. I'd like to imagine all these poor construction workers making an honest living - but the workers don't make out - the development companies that employ them make a killing then put them all back on the unemployment rolls when it's done. It's a double whammy for the tax payer. We can't look at any party now and say one is better than the other - they both work for the same master: The almighty dollar.
My comments are not an endorsement of the Keynesian approach, simply an acknowledgement that under our current top down/centralized system, it does work (to mitigate economic downturns), conservative rhetoric on this issue reduces to historical revisionism and (to put it more bluntly) stupidity (it amazes me that otherwise intelligent people buy into this crap, but unfortunately they do).
So, tell me oh wise one what happens when the money runs out? What you don't understand is business is continually productive and generates revenue - the government doesn't and takes that "productive revenue" out of the system.
So, when no businesses are producing revenue to pay taxes - where will the government get the money to put thousands upon thousands to work to improve the economy?
Obviously the extreme complexity of this issue is eluding you. At the current rates of interest the US is paying on treasuries, they could borrow a trillion dollars, and it would only cost $17 billion per year to service the debt. Even at a break even multiplier (or slightly less) this invigorates economic activity substantially (although, when it comes to calculating the multiplier, the conventional analysis is extremely short sighted, and ignores the long term gains we get from infrastructure investments that will reap benefits for decades -- like for instance modernizing our electrical grid, investing in alternative energy, expanding our public university system, rebuilding/replacing outdated bridges, scientific research, consumer debt forgiveness, and so on).
In other words, it's an opportunity cost issue. The Austrian (and increasingly, the conservative) analysis turns on assumptions like ... people make projections concerning future interest rates, and adjust their savings and spending accordingly. There's only one problem with this analysis, there's absolutely no empirical evidence to support it. The only demonstrable factor that (strongly) influences savings/consumption is "wages" (and I've read study after study that confirms this).
Therefore, the dichotomy you're painting is a false one. Sure, we can forego a stimulus, in which case we have years of sluggish economic growth, yet during that period, we'll still be accumulating high rates of debt (because federal revenue is suppressed during periods of slow/no growth). Or we could front load it, do a stimulus, invigorate economic growth, still wind up with a roughly equivalent (overall) debt load, but avoid years of unnecessary pain and hardship for millions of Americans (not to mention, a steadily declining quality of life).
Moreover, the faster we enhance economic growth the better (assuming your goal is merely enhanced economic growth, with no systemic changes). Once we get to a point where our GNP is growing faster than debt (even if we're still accumulating debt), our debt to GNP ratio will continually shrink (and this is really the only important factor when it comes to public debt).
So if what you say is true then why hasn't this happened with the 5 trillion that has already been spent in the past 3.5 years?
We are still at over 8% unemployment, 100 million people are receiving some kind of government assistance and the future is still bleak.
What you say sounds good in theory if it is applied that way but it isn't. All the stimulus went to the states to help them pay their debt.
Meanwhile, the economy didn't get a shot in the arm because of the way the money was spent - it only created more debt for the taxpayers to pay back at some later date.
The economy isn't going to change anytime soon regardless of how much money the government throws out there.
One of the reasons is because of the housing bubble - it created a glut of new houses and as a result the building trade has suffered. Gasoline prices have skyrocketed and the people are spending over $70.00 a week on gasoline. People have lost jobs.
There are no plans for this government to do anything about companies outsourcing jobs nor is there any plans in place to encourage business development in this country to stop the outsourcing.
When people aren't workng the economy suffers and government spending of billions of dollars to stimulate the economy only has short term affects until the money runs out.
We are coming up on our 3rd quantative easing plan and what then when that money runs out - another one.
The problems of this country aren't being addresed - jobs in the private sector is the only way this economy will recover.
Think about this if we allowed companies to build more oil refineries in this country and have the government require that all oil that comes out of the ground in this country be refined and sold here gasoline prices would drop like a rock. People would have more money to spend and there would be hugh increase in jobs.
In addition to that build more nuclear plants so that we will be prepared for the future when all these electronic electrical consuming autos come on to the market. Again by doing this we would put thousands of people to work and the country would be prepared for the future.
I could go on and on but I think you get the point - it's not the government that will sustain economic growth down the road it is businesses and working people - not government debt increases.
That's what you're not getting, $5 trillion has not been spent on stimulus, but rather, merely sustaining government at current levels (indeed, the revenue shortfalls are so bad, government is actually shrinking while our deficit is increasing). This is NOT a Keynesian stimulus, the pile of facts you're citing is unfortunately the typical gibberish that partisans feed the uninitiated.
To predict the behavior of ordinary people in advance, you only have to assume that they will always try to escape a disagreeable situation with the smallest possible expenditure of intelligence. Friedrich Nietzsche!
Again, a Keynesian stimulus is not what I have in mind when I think about the sort of real change that will alleviate us from this cyclical economic roller coaster we've been on, pretty much since the beginning. It's only a remedy if you're willing to accept, as a foregone conclusion, a certain kind of system. Moreover, I'm certainly not crediting Pres. Obama with economic brilliance.
If you want to argue politics with occupiers, understand this, we're not partisans, change will not trickle down from the top, there is no master you can vote for who will save you .... no such thing as a messiah (except in religious fiction). If you want to babble on about the republican party, or whatever other partisan mind-slave bullshit you believe in, I'm sorry to say, we won't be persuaded.
Steve if corporations want to take part in the American economy and sell their stuff here then they also have to employ them... it's really not up to the government to employ people. You can have the most innovative and greatest business on earth, but if noone has the money to buy what you are selling, you're in trouble... so right now corporations look to the government to help them sell their stuff using the little tax payer money they can get their dirty hands on - that's not fair. Collectively if corporations do their part = employ people and pay an honest wage for work performed - then they'll be rewarded with consumers who can buy their products. Right now they are all competing to lay off the most employees and shooting themselves in the foot. I worked under a CEO (countrywide insurance) who explained to a room full of workers why there would be no raises, and all benefits would be cut even as the company he had just boasted was making record profits - his answer to me (when I raised my hand and asked) was that is what the entire industry was doing and they needed to follow the trend to compete- huh? How's that for leadership and ignorance? Yes compete to drive down your consumer base - set a trend in the nation to downsize them into oblivion? Not motivate your workers with benefits and ease the stress about affording their kids' medications so they can focus better on their jobs? They thought the luxury class would sustain them and make them even richer - I watched them cut every 30 year loyal policyholder for three years straight that didn't own mansions and yachts - they thought this was genius (one percent turned out not to be enough so guess corporations should stop bagging on the 99 who are their true bread and butter) I think countrywide is bankrupt now - serves them right. But what do I know? I was just a broke file clerk with a pink slip and no health insurance who worked my ass off boxing up thousands of policies (each box weighing about 80lbs each) trying to get promoted, only to be laid off.
So who's sending the message to Washington DC to demand the government to change the way they do business?
Who's out there expecting the government to do everything for them?
Who's out there marching on Washington DC demanding from our representatives that they change the way they do business?
Who's out there marching on Washington DC demanding from our representatives that they get rid of business write offs
Who's out there marching on Washington DC demanding from our representatives that corporations who outsource jobs need to be penalized?
I don't see anyone marching on Washington DC and as a result I don't see anything changing.
The only way it will change is when people are in the face of their representative letting them know they want change or they will make change by voting in someone who will.
Forbes....Huh.....are they like vanity fair? Wonder what their insight on the subject matter could be.
Prosperity as a result of wasting resources sounds like stimulus to me as well, no?
Please consider getting on board for Debt Neutrality. http://debtneutrality.blogspot.com/2012/08/what-is-debt-neutrality.html
[Removed]
[Removed]
This is just common sense.
Here is the first page link - the lnk above takes you to page 2 - sorry about that
http://www.forbes.com/sites/dougbandow/2012/08/06/federal-spending-killing-the-economy-with-government-stimulus/
Hey wait a minute - doesn't Forbes have a love affair with wall-street? I mean isn't Forbes like a tapeworm feeding off of wall-streets bowels?
Hmmm . . . . wonder why they might bad mouth government stimulus . . . I mean didn't government bailout Forbes Host? Kept the Host alive so that Forbes could continue feeding?
Here is a link to Federal Spending Charts on Growth and Trends of Government Spending.
Can someone please explain to me how in the hell you are going to pay for all this. Even if you taxed all the million and billionaires at 100% you wouldn't have enough to pay off one trillion of it.
Are you people that moronic into thinking government spending is going to solve our economic problems - how sad.
http://www.heritage.org/federalbudget/federal-spending
Suspend interest until the debt is paid down or off.
Well, something needs to be done - this country can't continue to go down this path much longer - Hell the government could have given every American $10,000 - that would for sure have helped stimulate the economy.
It's going to get worse - just read a report that the Feds is undertaking Operation Repo Repurchasing Agreement - buying securities bonds and mortgage backed securities with promise to pay back with interest.
It can only get worse.
All the more reason for the public to reclaim government and give it proper guidance. ASAP.
Well the people can reclaim the government if all the people get involved - but you know as well as I they don't.
And when things go wrong they complain, want to take out the government and do away with it.
If more people got involved in how our government runs its business and keeps tabs on what's going on it can be changed.
It starts with the voters, who they elect, who they monitor and what bills they present to be voted on.
Be it republican or democrat it can be done -
And so I advocate - what about you?