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Calls Grow to Increase Stimulus Spending

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posted on Jul, 7 2009 @ 04:04 AM
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You need to study Econ.

Government spending DOES NOT equal consumer debt.

AD = C + I + G + (X-M)

If any one of the above: consumption, investment, government spending or net exports increase, overall AD will increase. And since employment is a derived demand, increase in G will lead to an increase in AD will lead to less unemployment.

But because the economy is in A MAJOR recession due to large fall in I because of all the banks crashing, IMMENSE C, G and (X-M) is needed to offset this fall in investments.

Consumers are more likely to save than to spend: Raising taxes was a fine idea because now the government has more revenue to use for the increase in G. If they lowered taxes, consumers would have been more likely to save the increase post-tax disposable income than to spend due to the current economic situation - so AD would not have increased very much.

Since the economy is in such a poor state, increase in G would = an EVEN higher increase in AD, which is needed. The multiplier effect would kick in in about 7 months' time and you'll see some major recovery happening, because USA's multiplier is VERY high.

Also don't forget that usually an increase in G complements a decrease in T, so I think the best measure for Obama after the spending starts to work is to LOWER taxes, so people will spend after they see good prospects for the future.

Also, I hope the administration does NOT turn to banks to finance their federal deficit - which would lead to the crowding-out effect, further lowering investments since less investors get access to loanable funds.

Otherwise, they are doing the RIGHT THING. It's not the wrong thing like so many of you mistakenly think.




posted on Jul, 7 2009 @ 04:17 AM
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Ok fool me once shame on me fool me twice shame on you
I hope there is no way that the people will stand for this first banks than auto and now oopsy do we messed up and now we will need more? More you say! NO! No more for you sir infact get your hand out of the countries dang cookie jar before we send you to time out mister!
When will the people say enough is enough? I have had it up to right about my neck with these people...More god I can't even believe that is a option at this point.



posted on Jul, 7 2009 @ 10:02 AM
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reply to post by Sestias
 


Sure, that is why U6 unemployment is sitting at 16% right now, it took 3 years to get to 25% unemployment during the Great Depression. Also when Roosevelt start all that spending the economy was recovering. All the spending and price controls of his policies killed the economy.

Also the War did not bring us out of the Depression, as soon as the war was over we had another Recession.

All this stimulus spending is making the problem worse. You cannot spend your way out of a debt problem. The country has way too much debt consumer debt government debt, all debt.

You cannot get out of debt by going further into debt. It is as simple as that.



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