• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

You can't spend your way out of a recession

You can't spend your way out of a recession

  • Total voters
    70
ronpaulvoter said:
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?
Click to expand...

fair enough - even tho it is not a legitimate comparison recognizing the purpose of government is not the action of an individual - but let's do equate this to an individual's response, arguendo
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)
 
nonpareil said:
The rationale is more in line of: "If you were in a deep recession and had limited money, would you jump up and run to Wal-Mart and buy" materials so you can make a product and sell for more than you spent, hopefully. That's why any "stimulus" has to be selective about the type of spending: it at least has to add jobs to the economy.
Click to expand...

And every "stimulus" Obama has come up with has done nothing to generate revenue except to steal it from the working people. Every one of his actions have made the recession WORSE.

I can't wait to see the November Congressional cleanout that is sure to happen, just like in 1994.
 
ronpaulvoter said:
And every "stimulus" Obama has come up with has done nothing to generate revenue except to steal it from the working people. Every one of his actions have made the recession WORSE.

I can't wait to see the November Congressional cleanout that is sure to happen, just like in 1994.
Click to expand...
please, some proof, please. your statements are nothing but inflammatory tripe.
 
nonpareil said:
The rationale is more in line of: "If you were in a deep recession and had limited money, would you jump up and run to Wal-Mart and buy" materials so you can make a product and sell for more than you spent, hopefully. That's why any "stimulus" has to be selective about the type of spending: it at least has to add jobs to the economy.
Click to expand...

Did you not read scarecrow's quote about the Broken Window Fallacy?
 
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:
Sanitas said:
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.

So, to answer your question... You most definitely CAN spend your way out of a recession.
Click to expand...

Let me tell you, these are the only two paragraphs I read. And let me tell you, that definition of a recession is WORTHLESS! Why is it worthless? Because demand doesn't matter. The problem occurs when production does not keep up with your population. That's the problem. So the proper question is not how do you get demand back, but the question rather is how do you get production moving again. And that's simple. Get badly allocated resources from failing companies (let them fail) and so let those resources naturally get diverted into those companies that are succeeding (investing, so people need more of their own money!).

So please, don't talk down to me. You only do yourself a disservice with a long diatribe like that.
 
nonpareil said:
And your point is...
Click to expand...

A stimulus cannot add jobs to the economy.

Well, I should be clear. It can only create more jobs than it destroys if it funds those jobs with inflation, and in that case those jobs aren't going to be very worthwhile and the inflation will destroy your lending institutions.
 
Last edited:
phattonez said:
A stimulus cannot add jobs to the economy.
Click to expand...

That would depend on the "stimulus". A tax break is less certain of "add[ing] jobs to the economy". A "stimulus" that is a new project is certain to "add jobs to the economy".
 
nonpareil said:
That would depend on the "stimulus". A tax break is less certain of "add[ing] jobs to the economy". A "stimulus" that is a new project is certain to "add jobs to the economy".
Click to expand...

Stimulus takes jobs away from the private sector because it takes money away from the private sector and spends it in less efficient ways. Tax cuts are giving money back to the private sector to spend in efficient ways.
 
phattonez said:
A stimulus cannot add jobs to the economy.

Well, I should be clear. It can only create more jobs than it destroys if it funds those jobs with inflation, and in that case those jobs aren't going to be very worthwhile and the inflation will destroy your lending institutions.
Click to expand...

You are talking bull****. What exactly does "funds those jobs with inflation" means? And how does having a job is not "very worthwhile" just because there is higher inflation? And have you ever read of the 70's stagflation?


You don't even have an idea of what the Broken Window Fallacy was attempting to say, do you?
 
phattonez said:
Stimulus takes jobs away from the private sector because it takes money away from the private sector and spends it in less efficient ways. Tax cuts are giving money back to the private sector to spend in efficient ways.
Click to expand...

Yeah, yeah, and they live happily ever after...:roll:
 
nonpareil said:
You are talking bull****. What exactly does "funds those jobs with inflation" means? And how does having a job is not "very worthwhile" just because there is higher inflation? And have you ever read of the 70's stagflation?


You don't even have an idea of what the Broken Window Fallacy was attempting to say, do you?
Click to expand...

Do you? The broken window creates work for the window man, the crowd says, while they forget about what the man would have spent money on except for the fact that he now has to spend money to break that broken window. It means you can't just point to government taking money out of your pocket and looking at what they spend and all the good it creates without taking into the effect the negative consequences of the theft.
 
phattonez said:
Stimulus takes jobs away from the private sector because it takes money away from the private sector and spends it in less efficient ways. Tax cuts are giving money back to the private sector to spend in efficient ways.
Click to expand...

at the end of 1934 over 20 million people were employed thru the new deal program; one out of six citizens
that program allowed the nation to emerge from the notso great depression

your presentation that the private sector loses jobs when government jobs are created is absolutely bogus
if the private sector finds the hire of an employee to be profitable then it will hire/retain the employee. if not, it won't
 
justabubba said:
at the end of 1934 over 20 million people were employed thru the new deal program; one out of six citizens
that program allowed the nation to emerge from the notso great depression

your presentation that the private sector loses jobs when government jobs are created is absolutely bogus
if the private sector finds the hire of an employee to be profitable then it will hire/retain the employee. if not, it won't
Click to expand...

How much money was used to employ all those people who were producing nothing of wealth? Jobs exist because they produce things that people want. Government jobs do not have to do this. The nation was made effectively poorer because of those government jobs. Furthermore, what jobs were not created because government was using all of that money?

This doesn't even take into account all that the government did to restrict employers on how they could employ people.
 
phattonez said:
Do you? The broken window creates work for the window man, the crowd says, while they forget about what the man would have spent money on except for the fact that he now has to spend money to break that broken window. It means you can't just point to government taking money out of your pocket and looking at what they spend and all the good it creates without taking into the effect the negative consequences of the theft.
Click to expand...

So why the hell were you talking about inflation?

And the fallacy is just half-ass as the assertion it's trying to dispute because it does not include the fact that the man might just have put his money under his mattress (there's no law that says he has to spend it) and then there's no job created at all. In a recession, that is usually the case: people pull back on their spending and investment because they are unsure of what the demand will be, what is going to be profitable etc.
 
phattonez said:
What is the cause of systemic failures in the marketplace?
Click to expand...

Systemic failures in governmental leadership that allow them to interfere with the marketplace.
 
phattonez said:
How much money was used to employ all those people who were producing nothing of wealth?
Click to expand...
$41.50 was the average monthly wage of a new deal worker in 1934; i'll go out on a limb and assume you can do the math

Jobs exist because they produce things that people want. Government jobs do not have to do this. The nation was made effectively poorer because of those government jobs.
Click to expand...
three-fourths of the money was spent on infrastructure projects. you know, things like the blue ridge parkway, TVA, courthouses and other government facilities (most still in use today). what a blight on America wrought by these public works programs
sarcasmx.gif


Furthermore, what jobs were not created because government was using all of that money?
Click to expand...
any making less than $41.50 per month. since that was a reduced wage to incentivize public works employees to upgrade into private sector jobs as they became available, it appears there would have been little loss of private sector employment

This doesn't even take into account all that the government did to restrict employers on how they could employ people.
Click to expand...
i have no idea what you were trying to say there and would be willing to bet you don't either
 
nonpareil said:
So why the hell were you talking about inflation?

And the fallacy is just half-ass as the assertion it's trying to dispute because it does not include the fact that the man might just have put his money under his mattress (there's no law that says he has to spend it) and then there's no job created at all. In a recession, that is usually the case: people pull back on their spending and investment because they are unsure of what the demand will be, what is going to be profitable etc.
Click to expand...

What happens when someone puts their money under a mattress? Prices fall. People will buy more. Maybe jobs are created? ;)
 
justabubba said:
$41.50 was the average monthly wage of a new deal worker in 1934; i'll go out on a limb and assume you can do the math
Click to expand...

Compared to what was the average salary in 1929?

three-fourths of the money was spent on infrastructure projects. you know, things like the blue ridge parkway, TVA, courthouses and other government facilities (most still in use today). what a blight on America wrought by these public works programs
sarcasmx.gif
Click to expand...

But we will never know if the money was better spent on these projects or on producing consumer goods. You can never know unless you leave it up to the market. And yes, the private sector can and has built roads.

The closest example I can find of private companies building roads.

[ame=http://en.wikipedia.org/wiki/Turnpike_trusts_in_the_United_Kingdom]Turnpike trusts in the United Kingdom - Wikipedia, the free encyclopedia[/ame]

any making less than $41.50 per month. since that was a reduced wage to incentivize public works employees to upgrade into private sector jobs as they became available, it appears there would have been little loss of private sector employment
Click to expand...

You're not taking some things into account. We're these things easier? More secure? Who would take the risk of a private sector job when this secure government job is there for you?

i have no idea what you were trying to say there and would be willing to bet you don't either
Click to expand...

There were rules put into about working hours and even a kind of minimum wage that meant most people had to go underemployed because they weren't worth those hourly wages that were being forced upon them. The thought of the day was that high wages brought prosperity and not the other way around. It was a catastrophe for unemployment.
 
phattonez said:
What happens when someone puts their money under a mattress? Prices fall. People will buy more. Maybe jobs are created? ;)
Click to expand...

Why would I buy something today when I can expect to buy them for less tomorrow? Why would I produce something today when I can expect to produce them for less tomorrow and sell for lesser the next day?
 
justabubba said:
$41.50 was the average monthly wage of a new deal worker in 1934; i'll go out on a limb and assume you can do the math
Click to expand...

It seems you assumed too much.
 
nonpareil said:
Why would I buy something today when I can expect to buy them for less tomorrow? Why would I produce something today when I can expect to produce them for less tomorrow and sell for lesser the next day?
Click to expand...

Because all you care about is how much you can get for your goods now. Storing goods for until that money comes into circulation means you have to take into account the price of storage.
 
phattonez said:
Let me tell you, these are the only two paragraphs I read. And let me tell you, that definition of a recession is WORTHLESS! Why is it worthless? Because demand doesn't matter. The problem occurs when production does not keep up with your population. That's the problem. So the proper question is not how do you get demand back, but the question rather is how do you get production moving again. And that's simple. Get badly allocated resources from failing companies (let them fail) and so let those resources naturally get diverted into those companies that are succeeding (investing, so people need more of their own money!).

So please, don't talk down to me. You only do yourself a disservice with a long diatribe like that.
Click to expand...

Aggregate demand matters because it controls equilibrium price level and quantity which directly affects consumer demand.

I encourage you to go back and read my post. I posted something that you would learn in a introduction econ course. It's textbook material, really.

I really hope you brush up on your knowledge of the macroeconomics, and how the economy works. It really is interesting stuff.
 
I encourage you to go back and read my post. I posted something that you would learn in a introduction econ course. It's textbook material, really.

I really hope you brush up on your knowledge of the macroeconomics, and how the economy works. It really is interesting stuff.
Click to expand...

Quit talking down to me. It really does you a disservice.

Sanitas said:
Aggregate demand matters because it controls equilibrium price level and quantity which directly affects consumer demand.
Click to expand...

Hmm, aggregate demand directly affects consumer demand? Demand affects demand?! Genius!

What you do when you aggregate is ignore the fact that consumption is still up in certain areas and down in others during a recession. Just because aggregate demand has fallen does not mean that all demand has fallen. Maybe it's you who should do some reading on economics. It really is interesting stuff.

Economics in One Lesson by Henry Hazlitt. You should read it. It's free online.
 
You must log in or register to reply here.
Back
Top Bottom