We would have had serious, and I mean SERIOUS difficulties using the military that couldn't fly helicopters into Iran in a major military conflict with an industrial power like the Soviet Union.
Defense spending is the broken glass. What could the people have bought for themselves if they weren't required to build weapons that in themselves can't build anything else? However, national defense is at least a defensible proposition. It's the reason the government was established.I. THE BROKEN WINDOW
Have you ever witnessed the anger of the good shopkeeper, James B., when his careless son happened to break a square of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation - "It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"
Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.
Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade - that it encourages that trade to the amount of six francs - I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! your theory is confined to that which is seen; it takes no account of that which is not seen."
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.
Let us take a view of industry in general, as affected by this circumstance. The window being broken, the glazier's trade is encouraged to the amount of six francs; this is that which is seen. If the window had not been broken, the shoemaker's trade (or some other) would have been encouraged to the amount of six francs; this is that which is not seen.
And if that which is not seen is taken into consideration, because it is a negative fact, as well as that which is seen, because it is a positive fact, it will be understood that neither industry in general, nor the sum total of national labour, is affected, whether windows are broken or not.
Now let us consider James B. himself. In the former supposition, that of the window being broken, he spends six francs, and has neither more nor less than he had before, the enjoyment of a window.
In the second, where we suppose the window not to have been broken, he would have spent six francs on shoes, and would have had at the same time the enjoyment of a pair of shoes and of a window.
Now, as James B. forms a part of society, we must come to the conclusion, that, taking it altogether, and making an estimate of its enjoyments and its labours, it has lost the value of the broken window.
When we arrive at this unexpected conclusion: "Society loses the value of things which are uselessly destroyed;" and we must assent to a maxim which will make the hair of protectionists stand on end - To break, to spoil, to waste, is not to encourage national labour; or, more briefly, "destruction is not profit."
What will you say, Monsieur Industriel -- what will you say, disciples of good M. F. Chamans, who has calculated with so much precision how much trade would gain by the burning of Paris, from the number of houses it would be necessary to rebuild?
I am sorry to disturb these ingenious calculations, as far as their spirit has been introduced into our legislation; but I beg him to begin them again, by taking into the account that which is not seen, and placing it alongside of that which is seen. The reader must take care to remember that there are not two persons only, but three concerned in the little scene which I have submitted to his attention. One of them, James B., represents the consumer, reduced, by an act of destruction, to one enjoyment instead of two. Another under the title of the glazier, shows us the producer, whose trade is encouraged by the accident. The third is the shoemaker (or some other tradesman), whose labour suffers proportionably by the same cause. It is this third person who is always kept in the shade, and who, personating that which is not seen, is a necessary element of the problem. It is he who shows us how absurd it is to think we see a profit in an act of destruction. It is he who will soon teach us that it is not less absurd to see a profit in a restriction, which is, after all, nothing else than a partial destruction. Therefore, if you will only go to the root of all the arguments which are adduced in its favour, all you will find will be the paraphrase of this vulgar saying - What would become of the glaziers, if nobody ever broke windows?
Welfare is more broken glass. What could the tax payers have bought if the government hadn't stolen their money to give to the useless....especially since the government has to spend a huge sum simply paying people to sort out the useless and allocate the money? Yet there's no Constitutional authority to do this.
Those aren't "real" products.
Ain't a single bridge in the country that can't be paid for by tolls or gasoline taxes.
If the legislators would stop stealing fuel tax revenues to fund socialist nonsense.
What happens when a legislator gets money? Well, taking the case of the "Tobacco Settlement", the state of California allocated nearly four dollars of new spending for each expected dollar of revenue.
Gee, that was a big surprise, wasn't it?
How about if we stop asking government to do anything besides standing on the side of the road with their thumb out. Motorists who don't want to give those thieves a lift shouldn't be forced to at gun point, as they are today.
Put it on a personal level:
If you were in a deep recession and had limited money, would you jump up and run to Wal-Mart and buy all the new gadgets you could to get out?
So why in the hell do you think having the government spend our way out would be any different?
once the person lost (their job and) source of income, (s)he could (a) live on the limited funds available to them until those resources become exhausted, then being no better off and then also being without the means to further support themself
or, (b) the individual could use the limited funds to start a small business, which might severely tap their resources, but which, if appropriately spent, could generate future income for sustainability
it appears your choice would be option (a)
I can't wait to see the November Congressional cleanout that is sure to happen, just like in 1994.
Who shall ascend the hill of the Lord? And who shall stand in his holy place? He who has clean hands and a pure heart, who does not lift up his soul to what is false, and does not swear deceitfully. Psalm 24
"True law is right reason in agreement with nature . . . Whoever is disobedient is fleeing from himself and denying his human nature [and] will suffer the worst penalties . . ." - Cicero
Speaking with regards to the macroeconomy, a recession is a decrease in the aggregate demand. There are two ways to increase aggregate demand and get it back to potential output, which are fiscal policy and monetary policy.
Aggregate demand: total demand for all goods and services produced in an economy
Fiscal policy is manipulating taxes and government spending and transfers to change aggregate demand. To increase aggregate demand you must decrease taxes and increase government spending. You would do this in a recession. To decrease aggregate demand you would increase taxes and decrease government spending. You would do that in an inflationary period.
Monetary policy can also change aggregate demand. Monetary policy is manipulating the money supply and interest rate with tools such as open market operations, the discount rate, and the reserve requirement.
Open market operations: buying and selling of bonds on the open market
Discount rate: the interest rate a central bank (in this case the FED) loans its money at
Reserve requirement: how much banks must keep in their reserves
With monetary policy, to increase aggregate demand, we would increase the money supply and decrease the interest rates. As with fiscal policy, this would be done in a recession, as we want to increase aggregate demand in a recession. To decrease aggregate demand we would decrease the money supply and increase interest rates. This is done in an inflationary period.
In fiscal policy, only (and ONLY) the government can enforce this as it involves govt. spending and taxes.
In monetary policy, only the central bank can enforce it. In our case, this is the Federal Reserve, which isn't really a branch of the government. Only they can use monetary policy to change aggregate demand.
These are facts that one would learn if they took a rudimentary Econ 101 course.
They are completely divorced from liberal/conservative political opinion.
So, to answer your question... You most definitely CAN spend your way out of a recession.
Last edited by Sanitas; 02-25-10 at 09:58 PM.
"All mankind is of one author, and is one volume; when one man dies, one chapter is not torn out of the book, but translated into a better language...No man is an island, entire of itself...any man's death diminishes me, because I am involved in mankind; and therefore never send to know for whom the bell tolls; it tolls for thee." - John Donne