(02-15-2011 03:55 PM)Redwingtom Wrote: I'm just saying that studies show that for every dollar spent by the government on these things returns far more to the economy than tax cuts for the top tax brackets do.
If you focus only on stimulating demand, maybe so.
But the structural problem is that we have done nothing but stimulate demand, in response to every problem, for the past 50 years.
We're the biggest importer nation in the world and the biggest debtor nation in the world because our demand has grossly outpaced our supply to meet that demand. We consume too much, we borrow too much, and we save too litttle. What really started this downturn was that banks stopped lending, and what has kept it down is that banks still aren't lending. When you are consuming too much, and saving too little, banks run out of money to lend. We're not going to start solving the structural problems until we change those things. And we're not going to have meaningful and sustained recovery until we address the structural problems. After 50 years, we are finally too far gone.
What these policies do is make the short run hurt less, at the price of ultimately making the long run hurt more. But when your politicians cannot think past November 2012, that's what you are going to get. In the end, we're going to get burned badly, and whoever's watch that occurs on is going to be reviled. But he or she will really be doing nothing worse than LBJ and Nixon and Ford and Carter and Reagan and Bush and Clinton and Shrub and Obama have done. I'd excuse Reagan and Clinton (and possibly Bush) from that list because some steps in the other direction got taken on ther watch. But Shrub has pretty much undone all that, and Obama has blown what was left of it away.
The outyear projections included with Obama's 2012 budget (like the 2011 budget) show near trillion dollar deficits in years projected to have 4% or higher growth. That, very simply, is running deficits for the hell of it. That's not just a violation of what Milton Friedman would say. It's also a violation of what Keynes would say.
Keynes said run deficits in bad times to stimulate demand, then make it up in good times by running surpluses and stimulating supply. That is perhaps a bit of an oversimplification, but not misleadingly so. We have not followed the second half of that for anything but the Clinton-Gingrich era out of the last 50 years. That's what's biting us in the butt, and we are not addressing it.
