Quote:
Originally Posted by Firestormalpha
So you're saying that spending money you don't have is the way to get out of debt?
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Well, Keynesian economics has a twofold proposition. You see, people can't run deficits like the federal gov't can. Neither can states. So, when the money flow stops people and the states can't really do much other than wait for jobs to pick up. But the federal gov't can run a deficit. So, back to this twofold proposition:
- When the economy is in recession, the gov't runs a deficit and injects money into the economy (via direct stimulus or lowered taxes) to spur job creation, lending, investment, etc. It's like kick-starting an engine.
- And when the economy is doing well, the gov't raises taxes, lowers the handouts, and pulls the money back out of the system.
Thus balancing out the extreme in the natural ebbs and flows of an economy.
Ideally. In a nutshell.
The real downfall is that during times of progress the gov't never keeps up the second half of the Keynesian economic system. Why? Because no matter how good the economy is, raising taxes never gets you votes.
So, you can judge the system on its merits for yourself. But, if you are going to undertake the idea that stimulus is needed in a recession, then you better damn sure make sure you inject enough money to actually get that kick-start you're looking for.
This recession we're in could look a lot like Japan's through the 90's, loooong with a slooow recovery. It's a major crisis of the very foundation of our economy that the US is suffering. We lost most all our production, farming it out to overseas locations. Now we've lost huge sectors of our services industries, such as computer services, also gone overseas. At some point we have to ask ourselves what it is we actually make or do that will bring money to us.
Cause right now all the money we have is getting pushed up to the rich, who just invest it overseas where deals are making money these days.