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Does governnent spending produce economic growth?

Does governnent spending produce economic growth?


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Everyone of my post is related to the OP including the one you just spammed
Helpful hint: If your response is related to the OP it would be helpful for all concerned to respond to the actual OP. Or, at least some other post that was pertinent to your post instead of something that had gone off track a bit..

You're welcome.
 
How can that be considered growth and not lateral movement?

It depends on how the money would have been spent, and how is spent.

If it is taxed away from someone who would have sunk the money into the near-black hole that we call the stock market, and if it is then spent on something that we need, like raising the height of a bridge so that big trucks can utilize the road, then the government spending may result in more growth than if it wasn't taxed away.

However, I don't generally advocate higher taxes, I actually think we should lower taxes on the worker/consumer class in order to increase demand.
 
In addition to my regular job, I have been trying to develop a business. I have noticed two years in a row now that I experience a great boost in sales after people get income tax refunds. Now I realize that in that case, mostly people are simply getting back their own money. But it makes me wonder, does government spending produce economic growth? If I understand them correctly, some say that this is never true. What do you think?

In a localized, short term view, yes, it does. In a national, long term view, no, it doesn't. In the short term, there is localized spending and growth, but over the long term, there is national loss of critical capital for investment into growth.


This is one the things that so perfectly illustrates one of the biggest differences between liberals and conservatives. Liberals tend towards short term thinking and conservatives tend towards long term thinking. Both have their advantages and even necessities, but short term thinking always leads to more problems than it solves.
 
In addition to my regular job, I have been trying to develop a business. I have noticed two years in a row now that I experience a great boost in sales after people get income tax refunds. Now I realize that in that case, mostly people are simply getting back their own money. But it makes me wonder, does government spending produce economic growth? If I understand them correctly, some say that this is never true. What do you think?

It depends. First in your example of tax refunds, the idea is not that they are getting more money to spend, it is that they are getting more money in a lump sum to spend. To do a simplified example, if you are making 50k a year, and your effective tax rate is cut by 1 %, then you are going to be getting about an extra 10 bucks a week to spend. This is not going to really change your spending habits. But if instead of getting 10 bucks a week, you get a lump sum 500 bucks, then you are probably going to splurge and buy something. New TV, new furniture, or in my case a bunch of books and DVDs. If a lot of people get that extra lump sum at once, then it will create a short boost to revenue if your company sells something people want.

Now to the meat of your question: does government spending produce economic growth. And as others have mentioned, the answer is that it depends. Up to the level of government revenue, the effect is probably a small reductionto a very small increase in growth(it more than likely varies by year and how the money is spent). However, the government does not spend to the level of revenue, it spends beyond that level. And that deficit spending also goes into the economy, creating more growth. So the end effect is an increase in growth.

We can even measure the effect of government spending on particular items to growth. Here is an example(first google return, not commenting on the actual accuracy of the numbers themselves, just using link to illustrate concept): Infrastructure Economic Multiplier - Business Insider. The article states that the normal multiplier for government spending is 0.5 to 1.5, meaning that for each dollar spent, it grows the economy between 0.50 dollars to 1.5 dollars. The article also states that infrastructure spending(roads and such) reach a multiplier of about 2, or 2 dollars growth for each dollar spent. While I do not endorse the actual numbers(though they could very well be right, I simply do not have enough knowledge to say they are right or wrong), the concept is pretty solid.
 
But the national debt must be paid back at some point with money that came from somewhere else.

You and I and other normal people think so.... but don't believe for a moment that our government thinks that.
 
...there is national loss of critical capital for investment into growth.....

No there's not. The same money can be spent over and over again. When money is taxed out of the private sector, it's immediately spent back into the private sector.
 
Printing more dollars only reduces value if they are chasing more goods than are available. Last time I checked, Walmart had plenty of stuff on it's shelves.

That is incorrect - you are thinking of an inflationary cycle, which overlaps, but is not the same, and your evidence is anecdotal.
 
But the national debt must be paid back at some point with money that came from somewhere else.

No, the national debt never has to be paid back. that's a myth.

We have had a national debt every year since 1838 and every year before 1835.

Every country in the world except for 7 have federal debts, and most of those seven are city-states or not much larger than city-states.

Federal debt is one of the things that stablizes countries money supply.
 
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You and I and other normal people think so.... but don't believe for a moment that our government thinks that.

If by "normal", you mean people who believe that governments have the same needs as people. then yea.

People who actually understand economics apparently aren't normal.
 
No there's not. The same money can be spent over and over again. When money is taxed out of the private sector, it's immediately spent back into the private sector.

That's interesting. I had no idea that government employees worked for free.


The issue is less whether or not money is moving, it is what is it moving to. Resources have multiple alternative potential uses, some of which are less productive than others. So if the government takes the money that I was going to use to invest in a business and uses it instead to A) pay federal workers B) lose some C) open up the Congressman John C Smith Bridge To Nowhere, then it has taken resources and moved them down the scale in terms of desirable uses.
 
I see. So kindly explain how the US printing $7 trillion for the banks caused the value of the dollar to increase 20%? I'll wait.

:shrug: demand increased more rapidly than supply as the world sought out security over return. It's the same reason our public debts' interest rates went down even as issuance skyrocketed.
 
That is incorrect - you are thinking of an inflationary cycle, which overlaps, but is not the same, and your evidence is anecdotal.

Yes, I am talking about inflation, that's what "reduces the dollars value" in my world.

What are you talking about? The exchange rate or something fancy like that?
 
But it your progressive world, it doesn't happen only then. In the progressive world the govt is spending huge 24/7/365.

Yes, in my progressive world, government does provide a safety net and protection (police/fire/EMT/health & disease control and navies) as well as certain services to the common, such as roads, bridges, airports (and air traffic control), high speed rail, ports, parks, dams & flood control, wildlife preserves, seashores, schools & universities.
 
Yes, in my progressive world, government does provide a safety net and protection (police/fire/EMT/health & disease control and navies) as well as certain services to the common, such as roads, bridges, airports (and air traffic control), high speed rail, ports, parks, dams & flood control, wildlife preserves, seashores, schools & universities.

I suspect that happens in the conservative world also, but let's just keep that a secret between you and me.
 
Yes, I am talking about inflation, that's what "reduces the dollars value" in my world.

You are thinking of net rather than effect.

A recent example: let us say, that there exists a hypothetical world in which gas used to cost $3.50 a gallon. Supply, however, had increased, to the point where gas falls to $2.00 a gallon. At the lower price, however, fewer producers are profitable, and so supply decreases, as gas rises $2.50 a gallon.

Now, would you look at that example, point confidently to the decrease in price from $3.50 to $2.50, and declare that the later decrease in supply obviously did not increase the price per gallon?

To take the same math: (back of napkin) if you have supply of dollars, and demand rises 30% while supply rises 20%, then the subsequent 10% increase in price is not indicative that increases in supply did not degrade the value of the previous dollars. It only means that demand outstripped it.
 
If by "normal", you mean people who believe that governments have the same needs as people. then yea.

People who actually understand economics apparently aren't normal.

It depends on their understanding of economics, and as with everything, there are good and bad economists.
 
My answer to the OP: It can, so long as people are still willing to loan the Government money.

It depends on their understanding of economics, and as with everything, there are good and bad economists.

IMO any economist who offers "solutions" is a bad economist, there are no solutions. There are costs and benefits to ALL decisions.
 
That's interesting. I had no idea that government employees worked for free....

Me either. Who said that?

To the best of my knowledge, government workers do get paid, and they spend that money in the private sector, just like private sector workers do.
 
:shrug: demand increased more rapidly than supply as the world sought out security over return. It's the same reason our public debts' interest rates went down even as issuance skyrocketed.

Get real. You just said more money devalues the dollar. You're falling off both sides of the fence.
 
Me either. Who said that?

To the best of my knowledge, government workers do get paid, and they spend that money in the private sector, just like private sector workers do.

Public sector workers represent a public sector cost. You are attempting to structure your definitions in such a way that there is no such thing as public sector expenditures.
 
Get real. You just said more money devalues the dollar. You're falling off both sides of the fence.

:shrug: never mind. I guess two possible drivers is too complicated for some :)


It's because of the Illuminati, Dave. They are controlling the worlds' monetary supply :).
 
Government does not “pump capital into any economy”. Government cannot give what it hasn't taken from someone else. Every dollar that government “pumps” into some part of the economy is a dollar that it took out of some other part of that same economy.

Any wealth that anyone gets from government, is wealth that government took from someone else. Any economic activity that is stimulated in one part of the economy, is at least matched by a suppression of economic activity somewhere else.

:3oops: The principal funds collected from bond purchases are used in order to fund deficit spending, whilst simultaneously guaranteeing the investor his money back in its entirety. Thus, economic growth can and does occur without the theft of another's capital or detrimental effect on an unrelated sector of the economy.
 
Public sector workers represent a public sector cost. You are attempting to structure your definitions in such a way that there is no such thing as public sector expenditures.

Obviously there are public sector expenditures, but they are spent into the private sector economy.

Do you think that government employees only shop at government owned stores?
 
Since you are specifically asking about growth, can you call it growth if you take it from one place in the economy and give it to another?

Growth and movement are different concepts.

No that is not growth.
 
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