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You can't spend your way out of a recession

You can't spend your way out of a recession


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



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.

Do you know anything about econ?

Aggregate demand is the TOTAL DEMAND for all goods in service in an economy. It is all demand.

Aggregate | Define Aggregate at Dictionary.com
 
Do you know anything about econ?]

What did I just tell you about talking down?

Aggregate demand is the TOTAL DEMAND for all goods in service in an economy. It is all demand.

Aggregate | Define Aggregate at Dictionary.com

Yes, wise guy, I understand that. However, you can't analyze an economy just be looking at aggregate demand because demand for certain things is up or sustained and demand for other things has dropped. So you can't just conclude that lower aggregate demand will lead to lower production. In fact, the situation that I described would say that a shift in the economy is necessary. Trying to prop up demand will just create a bubble.
 
What did I just tell you about talking down?



Yes, wise guy, I understand that. However, you can't analyze an economy just be looking at aggregate demand because demand for certain things is up or sustained and demand for other things has dropped. So you can't just conclude that lower aggregate demand will lead to lower production. In fact, the situation that I described would say that a shift in the economy is necessary. Trying to prop up demand will just create a bubble.

Have you seen a aggregate supply and demand model? I'll show you.

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Along the Y axis is price level and along the X axis is output (GDP) or total production.

Where aggregate demand and short run aggregate supply come together, this defined price level and output (or production).

When aggregate demand shifts to the left (recession), output falls. There is no way around it.

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I have to go for now, but I'll be back later.
 
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Hogwash. You cant 'spend your way out of a recession'...you merely dig a deeper hole that someone else has to pay for.

Artificially propping up an economy doesnt stimulate growth.

Why not?

.........
 
Along the Y axis is price level and along the X axis is output (GDP) or total production.

The problem here is that GDP is not an accurate measure of production because it counts government spending as being as effective as private spending when it isn't because government doesn't know our demands like we do.

Where aggregate demand and short run aggregate supply come together, this defined price level and output (or production).

When aggregate demand shifts to the left (recession), output falls. There is no way around it.

Sure, but who cares? Why would you want an economy that is not producing the things that people want? General production is not important. What we want our economy to do is to satisfy the demand of consumers.

I have to go for now, but I'll be back later.

Maybe with a little bit of humility when you do?
 
The problem here is that GDP is not an accurate measure of production because it counts government spending as being as effective as private spending when it isn't because government doesn't know our demands like we do.

If you really wanted you could take government spending out of the GDP formula. It would still be the same - that when aggregate demand falls, so does output.

Sure, but who cares? Why would you want an economy that is not producing the things that people want? General production is not important. What we want our economy to do is to satisfy the demand of consumers.

I understand. This is not a classical economy. Supply does not create its own demand.

The market works in a way so that only successful businesses stay open. This is called creative destruction, and it happens in any basic free market.

Who is producing goods that nobody wants? I really didn't know what you were getting at.

Maybe with a little bit of humility when you do?

Didn't you mention something about talking down? I stopped doing that.
 
Didn't you mention something about talking down? I stopped doing that.

It seems like you finally have.

Now, by what you're showing me, you're trying to argue that government needs to prop up demand in order to keep an economy going. Make work programs, inflation, it's all the same. Let me pose a situation to you.

1. An economy where the government pays everyone to produce war goods. GDP will be good.

2. An economy where private businesses are allowed to run and the government tries to interfere as little as possible. GDP is not as high as in situation 1.

So, GDP is higher in situation 1 (simply because via inflation they can pay their workers much better than in situation 2 meaning government spending will be greater here than consumption and investment in situation 2), but which economy is better?
 
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.

:doh:doh:doh:doh:doh

Read again. There's no storing involved.
 
It seems like you finally have.

Now, by what you're showing me, you're trying to argue that government needs to prop up demand in order to keep an economy going. Make work programs, inflation, it's all the same. Let me pose a situation to you.

1. An economy where the government pays everyone to produce war goods. GDP will be good.

2. An economy where private businesses are allowed to run and the government tries to interfere as little as possible. GDP is not as high as in situation 1.

So, GDP is higher in situation 1 (simply because via inflation they can pay their workers much better than in situation 2 meaning government spending will be greater here than consumption and investment in situation 2), but which economy is better?

Whichever one employs the most people with the highest wages so they can have the highest living standard possible. If the government can sell war goods to other countries for a premium and the import cheap everyday goods from China to satisfy everyone, the answer is 1. You should read more about Comparative Advantage if you're going to spend so much time in an Economics forum.
 
:doh:doh:doh:doh:doh

Read again. There's no storing involved.

And that money isn't in the economy at the time. The money that people do have then will be worth more until that money gets back into the economy.
 
Whichever one employs the most people with the highest wages so they can have the highest living standard possible. If the government can sell war goods to other countries for a premium and the import cheap everyday goods from China to satisfy everyone, the answer is 1. You should read more about Comparative Advantage if you're going to spend so much time in an Economics forum.

How is it so obviously 1? You're still producing things of no value and there is no guarantee that the war goods are more valuable than other things that could be produced. It seems that most of the time you will be worse off this way.
 
How is it so obviously 1? You're still producing things of no value and there is no guarantee that the war goods are more valuable than other things that could be produced. It seems that most of the time you will be worse off this way.

Do I have to give you a lesson in reading as well? :confused: :sigh:

When reading for comprehension there's a few things you should take note of:

The premise, e.g. Whichever one employs the most people with the highest wages so they can have the highest living standard possible.

The condition, e.g. If the government can sell war goods to other countries for a premium and the import cheap everyday goods from China to satisfy everyone,

The conclusion, e.g. the answer is 1.

Normally, when people dispute the conclusion, they can say the premise is not right so the conclusion is invalid, or that the condition is not met so the conclusion is invalid.

Your response is equivalent to this:

nonpareil: x=y. Given x=2, y=2.

phattonez: How is y = 2? a+b+c = 10.
 
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And that money isn't in the economy at the time. The money that people do have then will be worth more until that money gets back into the economy.

So there's no spending unless the government do it.
 
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Now, by what you're showing me, you're trying to argue that government needs to prop up demand in order to keep an economy going. Make work programs, inflation, it's all the same.

Yes, and cut taxes, rebuild/fix infrastructure, write grants, and loans.

All of these are expansionary fiscal policy, which increase aggregate demand (get us out of a recession). Work programs allow for more work, making people who wouldn't otherwise work get work, or underemployed get better job skills with which to get a better job. This in turn is more workers - more wages being paid out: aggregate demand increases because more people are contributing to purchasing of more goods. It's supply and demand. The same works for cutting taxes - public has more more: more demand. Rebuilding infrastructure goes along with jobs while writing grants and loans allows for more purchasing of goods and services. All of these methods have a lagging period because it takes a deal of time for those benefited to begin contributing to aggregate demand.

Even with that, we still are seeing a growth in GDP which means we are technically out of the recession. I'm not saying we need more spending, but I am justifying the stimulus package.

When you think about it, the question "Can you spend your way out of a recession?" is a little foolish since we already have.
 
I spent more money today, than I had coming in. I must be getting rich. :lol:
 
Yes, and cut taxes, rebuild/fix infrastructure, write grants, and loans.

All of these are expansionary fiscal policy, which increase aggregate demand (get us out of a recession). Work programs allow for more work, making people who wouldn't otherwise work get work, or underemployed get better job skills with which to get a better job. This in turn is more workers - more wages being paid out: aggregate demand increases because more people are contributing to purchasing of more goods. It's supply and demand. The same works for cutting taxes - public has more more: more demand. Rebuilding infrastructure goes along with jobs while writing grants and loans allows for more purchasing of goods and services. All of these methods have a lagging period because it takes a deal of time for those benefited to begin contributing to aggregate demand.

Even with that, we still are seeing a growth in GDP which means we are technically out of the recession. I'm not saying we need more spending, but I am justifying the stimulus package.

When you think about it, the question "Can you spend your way out of a recession?" is a little foolish since we already have.

Did you read any of the examples I wrote about explaining why GDP is a bad measure of productivity? You can't get an economy to produce the things that people want if you leave the government in charge because the government doesn't know what we want and doesn't have to operate with a risk of loss.
 
I suggest that everyone that thinks you can, send your money into the govt for the good of the nation.
 
I suggest that everyone that thinks you can, send your money into the govt for the good of the nation.

I already do, every April 15.

Back on topic.
 
Did you read any of the examples I wrote about explaining why GDP is a bad measure of productivity? You can't get an economy to produce the things that people want if you leave the government in charge because the government doesn't know what we want and doesn't have to operate with a risk of loss.

What should we have relied on during the recession, then, if not fiscal policy?

(Also, can you please clarify if you are opposed to government spending, tax cuts, or both?)

To keep from over inflating our economy, we could not manipulate the money supply too much. Our interest rates were at (and are at) an all time low - near rock bottom. The Fed was scrambling to use all the tools they have to prop up the economy. So, the government stepped in, instead of allowing the US economy to completely fail.

Many economists agree that Bush and Obama government spending averted us from further economic downfall, even depression.

Are you arguing we should have done nothing - leave monetary and fiscal policy in the toolbox and leave everything up to free markets?
 
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What should we have relied on during the recession, then, if not fiscal policy?

(Also, can you please clarify if you are opposed to government spending, tax cuts, or both?)

To keep from over inflating our economy, we could not manipulate the money supply too much. Our interest rates were at (and are at) an all time low - near rock bottom. The Fed was scrambling to use all the tools they have to prop up the economy. So, the government stepped in, instead of allowing the US economy to completely fail.

Many economists agree that Bush and Obama government spending averted us from further economic downfall, even depression.

Are you arguing we should have done nothing - leave monetary and fiscal policy in the toolbox and leave everything up to free markets?

I would have pursued tax cuts and spending cuts. Government spending always necessarily decreases how much money you get back for your labor. The proportion of your salary that you get to keep is proportional with how productive you will be. The more we get back for our work, the more we will work.

Because the problem with a recession isn't insufficient demand. Insufficient demand isn't really a problem. The problem is that production has fallen. We should want production to rise. And I'm not talking about aggregate production, I mean production of things that people want. The government cannot know that, only entrepreneurs can experiment to figure that out. However, for that to happen, we need to free up resources from the large companies that are shedding money. Let them go bankrupt to free up capital for those that are trying to figure out what people want now.
 
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