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The Recession Spectator
A Ladder to Nowhere
Why WWII-level deficits won’t work today.
(Page 2 of 2)
4) It is worth citing some of Keynes’s own words. Keynes famously spoke the importance of “animal spirits.” He wrote: “If Enterprise is afoot, wealth accumulates whatever may be happening to Thrift; and if Enterprise is asleep, wealth decays whatever Thrift is doing.”
What happened to put Enterprise back on its feet in this country at the end of the Depression? Clearly it was the rude awakening provided by the bombing of Pearl Harbor and the threat to freedom here and abroad. Certainly it wasn’t any public works project dreamed up by geniuses in Washington, D.C.
Indeed, nothing captures Keynes’s notion of Enterprise asleep any better than old pictures from Roosevelt’s WPA of writers, stock brokers, and other white-collar types leaning on their shovels as they pass the time of day in idle chatter.
Putting more shovels into the wrong hands through hastily contrived, government-sponsored projects won’t do any more good today than it did back in the 1930s.
To try to stimulate the economy in this way is truly to build a ladder to nowhere.
About the Author
Andrew B. Wilson, a frequent contributor to The American Spectator, writes from St. Louis.
Letter to the Editor View all comments (40) | Leave a comment
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Robert Rosencrans| 6.2.09 @ 6:49AM
Important points. Especially number 2. We are no longer working together for a common goal. We have one half of our population simply taking from the other half so that they can have the lifestyle they desire. That will never create wealth or prosperity.
While the American media fawns over Obama's every thought and move, few have the insight or financial skills to analyze the effects of government spending at 25% of GDP, the highest ever.
In the meantime, liberal institutions lay awards on the heads of well meaning individuals like Paul Krugman, whose theories have been disproved by unknown economists.
Gold is now once again approaching $1,000 an ounce. Gold has been moving silently towards this point, and if it passes this point we will have some real problems ahead.
While Barack and Nancy Pelosi spew tons of carbon into the atmosphere, all the while telling the rest of us that we have to watch our carbon output or footprint, another problem surfaces. Politicians have become elitists, setting standards for the general population that they themselves do not abide.
Yes, Obama is turning his campaign promises into reality, but, apparently, they aren't working. The bailout of the banks is a farce with the banks simply sitting on the cash hoping they can force interest rates higher. Geithner is over in China and the students over there ask better questions about his phony assertions then the journalists in America with 20 years experience. In fact, Geitner's statements were so ludicrous the Chinese students laughed him out of the room. The journalists in America are idiots. Some students in China saw right through the tax cheat, and right through Obama's fiat currency. Get ready for a financial maelstrom.
http://kdvr.biz/forum/viewtopic.php?f=4&t=1579&p=15504
U.S. Treasury Secretary Timothy Geithner on Monday reassured the Chinese government that its huge holdings of dollar assets are safe and reaffirmed his faith in a strong U.S. currency.
A major goal of Geithner's maiden visit to China as Treasury chief is to allay concerns that Washington's bulging budget deficit and ultra-loose monetary policy will fan inflation, undermining both the dollar and U.S. bonds.
China is the biggest foreign owner of U.S. Treasury bonds. U.S. data shows that it held $768 billion in Treasuries as of March, but some analysts believe China's total U.S. dollar-denominated investments could be twice as high.
"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University…
His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.
The Beijing-based Global Times greeted Geithner by publishing a survey of Chinese economists who called big holdings of U.S. debt "risky."
Bram| 6.2.09 @ 8:02AM
This level of government spending has been tried before and has never made a nation richer - never, anywhere.
Eric A| 6.2.09 @ 8:33AM
Dear David,
Don’t you find it even the slightest bit creepy that the thugs among us can vote to use government force to help themselves to somebody else’s paycheck, no matter how affluent they are and no matter how vulnerable their victim?
Do you think it is okay when greedy luxury-seekers default on a half-million Fannie Mae mortgage and then demand the frugal folks who bought a $100k fixer-upper pay extra taxes to keep them in their McMansion?
Or take, for example, Obama’s auto plan: he violates plain law by suspending normal bankruptcy that gives bondholders the first claim, and hands disproportionate ownership of a car company to powerful union thugs who do not have legal entitlement to that position. He justifies violating the law by claiming he is opposing wealthy speculators on behalf of the working class.
Result? Somewhere some little old lady who used to be a modestly-paid teacher, and invested in a bond fund precisely because it was legally lower-risk, has just been screwed by Obama so that he can hand her cash to the politically powerful UAW. This includes a cohort of workers whose life-time pay and benefits may well have exceeded hers. Notice Obama doesn’t even give the stolen cash directly to the auto workers; he hands it to the union leadership, because his goal is collectivism, which requires that all economic power be placed in the hands of the ruling class and not – god forbid! – in the hands of individual workers. That’s why he seems so content to let workers’ 401Ks be destroyed – better they not be individualistically financially independent of government.
There. That’s socialism. The other side of the coin of fascism. If you give the government the power to take property from one and give it to another (or if you stand by as the president dictatorially ignores the law) you do not get the nice liberal result of the strong helping the weak. You get the fascist result of the strong raping the weak using government force, all prettified by sweet words on the teleprompter.
Congratulations – did you intend to sign up for fascism?
Mike| 6.2.09 @ 8:44AM
Mr. Wilson writes an interesting analysis. Like so many conservative critiques, he fails to offer an alternative to the current administration's policy. I suspect the reason is because the only one conservatives have is to let the market work. Had Mr. Bush followed that prescription we would be in a world wide depression today. The public works/war dichotomy argued by Mr. Wilson, while worth noting, skirts the essential point: massive government spending turned the economy around. Mr. Wilson writes, "Though they expected to go their separate ways after the war, government and the private sector were on the same page during the war. Through a combination of forced and voluntary austerity, people limited their purchases to necessities during World War II, and companies refrained from making investments not related to the war effort." Oh yes, the halcyon days of socialism under FDR when the private sector reached new heights of innovation and productivity. Damn that FDR. While arms production was absolutely necessary during World War II, the fact remains that when a ship is sunk, a capital machine is lost. No more production. When a machine is produced to manufacture consumer goods, that machine increases overall prosperity. Econ 101 Mr. Wilson.
Indiana Alex| 6.2.09 @ 9:03AM
Liberals live the life of a child.
Sometimes they grow up, but then they are no longer liberals.
Howard| 6.2.09 @ 9:03AM
Some of the New Deal programs and agencies were effective. The SEC, Social Security, most public works were worthwhile. Some things such as the NRA, and various price fixing schemes were illegal and unworkable. Obamas stimulus package is ill timed most of the expenditures will not be until 2010 and 2011. The New York Times had an article recently pointing out the puny amount already spent. The analogy would be the US spending most dollars for WWII in 1946 and 1947. Stupid and impractical.
Eric A| 6.2.09 @ 9:48AM
Thank you, Mike, for presenting a reasonable and rational argument. However it is incorrect.
“The public works/war dichotomy argued by Mr. Wilson, while worth noting, skirts the essential point: massive government spending turned the economy around”.
But if public spending were the cure, why did it fail to end the depression years earlier? Why did public spending magically start working when the war started? i.e. What caused the public works / war dichotomy?
First, the war created a huge demand by other nations for food and manufactured goods, because their men were off fighting instead of working.
Second, the war created a huge supply-side effect. In normal times, higher after-tax returns are required to induce more capital and labor participation. But if a woman knows that her efficiency of assembling aircraft may someday save her husband’s life when he’s drafted, she is willing to supply an extraordinarily higher work effort for the same money.
This was not FDR borrowing another billion to pay some down-and-outers to lean on a shovel over a road that could have been graded better by a machine. This was private-sector American workers and managers accomplishing miracles of technological production and innovation.
And notice this key point: the revival was one hundred percent private-sector delivered, not a public works program, and absolutely not socialism, i.e. government running the means of production. The government was the customer buying the airplanes, but the design and production was accomplished outside of the public works bureaucracy.
So public spending – not public works – can have a positive effect if it is targeted toward letting private sector investors drive the decision-making about creating companies (i.e. supply side) to fulfill demands of customers, including the government.
For example if the Obama Democrats – after killing the car companies with $4 gas and bad credit policies – had tried to rectify their mess by handing large tax credits to workers to buy new cars (the higher the mileage the higher the credit) then the supply side would have kicked in as investors competed to pick the winners who could best deliver new demand for private-sector innovations.
Instead they’ve exploited the crisis to increase government control of industry. The result will not be the WWI-era explosion of private-sector innovation and production; it will be the same stultifying, impoverishing socialism of the early Depression era.
ray esquivel| 6.2.09 @ 9:52AM
Good God, somebody get David Matthews his own blog site! A raving, and probably flaming, ranting lunatic! Anger and stupidity, a very combustible mixture.
ds80| 6.2.09 @ 10:48AM
ray esquivel: don't worry about David Matthews. He's our pet crazy uncle we keep in the basement. He knows it, too, and plays along.
ds80| 6.2.09 @ 10:52AM
The author says (and I agree), "To try to stimulate the economy in this way is truly to build a ladder to nowhere. "
In other words, paving the road to hell with "good" intentions.
ds80| 6.2.09 @ 11:22AM
Please spare us any armchair economist pronouncements (Mike?). Governments of all political flavors have always meddled in the economy.
Common sense applies: ultimately, you can't borrow your way out of a debt bubble. In the meantime, however, Bernanke/Geithner/Paulson et al, will sacrifice the working class to cover the investments of their BIG FINANCE buddies. When the rest of us are paying the price with a debased currency (or defaulted government debts and bankrupt Social Security, Medicare, and military & civilian pensions), they'll continue to nibble their caviar.
This would be a good time to start a pitchfork company.
Mike| 6.2.09 @ 11:47AM
Eric,
I appreciate your response. A few observations:
1. You ask, "But if public spending were the cure, why did it fail to end the depression years earlier?" Some economists argue that the New Deal stimulus package was too little. In addition, once it started working, FDR tried to balance the Federal budget, thus ending the stimulative effects of his program. Once at war, the government was committed to spending whatever it took without concern for the national debt.
2. While I understand your effort to present Keynsian economics as supply side economics, I disagree with your analysis.
3.You write, "This was not FDR borrowing another billion to pay some down-and-outers to lean on a shovel over a road that could have been graded better by a machine. " One can argue that the "down-and-outers" did laudable work in our national parks. Could the work have been done by machine more efficiently? Yes. However, to provide work for people without work and without hope can appear to some to be a higher value than economic efficiency. Whether one values improvement to national parks or not depends on one's values and priorities. The efficiencies you discuss came during the war at a time of full employment, not during the depression.
4. You write: "For example if the Obama Democrats – after killing the car companies with $4 gas and bad credit policies –" Sorry, you lost me on this one.
Son Of Sam | 6.2.09 @ 11:54AM
If the economy could be "stimulated" by massive government debt and deficit spending, why didn't it work for Bush? The only difference between him and Obama is that the TelePrompter In Chief has spent our money at a rate five times that of his predecessor.
As I see it, sooner or later all this money has to come from somewhere, and I think we're looking at three choices:
A) raise taxes, massively. Yup, and I'm sure it will only affect "the rich"; the middle class will remain completely untouched. We won't see taxes skyrocket every time we get our kids a soda, have a beer with friends, put gas in our cars or turn on the AC. Yeah right: have another hit off the bong, and pass it along to davey.
B) borrow the money: Besides the fact that it only postpones the pain, is no one concerned that the Chinese are already saying that they've had enough? That they no longer think that our trash is their treasure? That they will clearly be demanding something in return for their continued financing of our out of control government? Hmmm........anyone notice Princess Pelosi made nary a peep about human rights on her most recent trek to Beijing? Anyone think that's a coincidence?
C) Just print more money. Which will crank up some lovely hyper inflation. Yup, the old Weimar/Mugabe/Carter technique. Like that won't affect every middle class person in the country, to say nothing of seniors on fixed retirement incomes and the working poor.
If I were a betting man, I'd be laying odds on option C, for the simple fact that for A they'd sort of need Congress and for B they'd sort need other governments. Inflation they can do all on their own. BUT, I think it will come with this important twist:
PRICE CONTROLS
which naturally will lead to massive shortages, since no one in their right mind will keep producing an article that costs more to make than they are allowed to sell it for.
Two bits says that four years from now, the ObamaNazis will still be blaming it all on Bush. And a shot of demerol and some clean sheets says Kool Aid swiggers like davey dumbass will still be buying it.
stand strong until freedom dawns
Son Of Sam
http://www.samadamssos.bravehost.com
Eric A| 6.2.09 @ 12:02PM
Dave - perhaps you should actually read posts you respond to.
“Evidently Eric missed the entire housing bubble collapse, credit crisis and the death of consumerism. He's have Americans borrow more money to spend it on consumer products they don't actually need. “
I referred specifically to the credit crisis (and subsequent housing bubble) that was created when Democrats like Senator Barak Obama blocked Bush from reining in the fire-hose of bad credit that Democrats were spraying through Fannie Mae / Freddie Mac, to push unqualified people to buy big houses they don’t need and can’t afford.
I don’t know who you live off of Dave, but the average worker needs a good car to earn a paycheck, so it’s not exactly a case of “consumer products they don’t actually need”.
You think giving a tax credit to people to buy a new car is “delusional”? Okay, let’s stick with the Obama approach: let’s borrow another bazillion dollars to give more money to bankrupt corporations to build more cars that pile up on dealer lots because people can’t afford to buy them. Gee, why isn’t this working?
Hmm…if only the people could afford to buy cars, if only there was some way of giving a middle-class worker an incentive to buy a new energy-efficient car and put the UAW back to work…. hmm…some way to put more money into their take-home….whatever could that be….some way for workers to actually keep more of what they earned, to spend on something to employ the unemployed and improve energy efficiency…hmmm…..a tax credit? Nahhh! The Annointed One says tax cuts don’t work! No need to think any further! Sieg Heil!
janet| 6.2.09 @ 12:22PM
Eric A,
Excellent posts. Your analysis is intelligent, insightful, right-on. Thanks for trying to explain economics and history of political thought to a more-often-then-not, illiterate public.
Old Texican| 6.2.09 @ 12:59PM
Eric A
Thank you so much for joining the discussion here.
I have only read a couple of your first ones so far, because I wanted to scroll down here and make this thank you before going back up to continue the discussion.
I look forward to it.
Actually pretty brilliant well written comments
Old Texican| 6.2.09 @ 1:01PM
Robert,
As always...thank you. You nad Eric spark off each other really well.
Old Texican| 6.2.09 @ 1:24PM
Eric and Robert, now that I have read the above, I would like to sorta' extend the discussion into the "motivations" of our so-called leaders.
First though, one quick dip into a question in the past. Was FDR a communist, or was he guided by Harry Hopkins et al. in the wrong direction?
I personally believe FDR was trying to manage an emergence from the agrarian economy to a fully industrialized economy. Later in the 30s I believe he saw pretty clearly what was going on in China and in Europe, and I wonder if that spurred him in his industrialization push.
OK motivations present day:
I think our hugest mistake would be to imagine that our DC leadership now is "accidental" or clueless as many centrists seem to believe.
I truly do believe O's crowd is committed to restructuring our country with them being the new "Nomencultura" (sic).
I personally believe Bush was guided to make a huge statement that "the banks shall not fall!"
Even Newt stated on Fox that "obviously "something".....had to be done right then. That the American needed to believe the government was protecting them similarly to being at war.
I also believe that Dubyah and Cheny were seriously focused on the Islamist threat, present and future if in fact Obama were to be elected and our defenses knocked down.
Thoughts?
janet| 6.2.09 @ 1:38PM
Old Texican,
I know your query was to Eric and Robert, but in my opinion FDR was a true socialist at heart, ever wanting to expand the role and realm of government control. His policies have been proven failures that actually prolonged the Great Depression. He was also first among many to use the Courts in implementing his policy goals in ways that the Founding Fathers would find astounding, which has led to judicial tyranny. I also believe that you are correct in stating that it would be a huge mistake to think that the current DC leadership is oblivious to where their stated goals will lead us. The takeover of privately held companies, abrogation of contractual law, "greening" the auto industry, etc. is purposeful on their part. The desctruction of capitalism has always been their agenda and by controlling the educational establishment in this country and continually fanning the flames of class warfare, many people have fallen for their empty promises.
Old Texican| 6.2.09 @ 1:47PM
I just have a minute, Janet, but good observations.
I suppose I was really trying to look into FDR's motives...the whys...rather than the obvious directions he chose.
He was from a powerful rich family...and I think he loved America and was trying the new theories out and about to guide the industrialization process.
Teleprompter Messiah| 6.2.09 @ 2:13PM
We really are headed for 1970's economics here.
The thing that strikes me is that we have an entire generation of new voters who have only known the prosperity of America inaugurated during the Reagan years. The hallmark of this era has been relatively tame inflation, a strong dollar, great growth in productivity and generally, strong economic growth. Growing up with these things, one assumes they are perpetual. Therefore, one is affluent enough to believe one may tinker to perfect the real and perceived imbalances of the market economy.
The problem is, tinkering may have short term upside, but tremendous long term downside. All the things one assumed to be perpetual are now ephemeral.
Borrowing trillions for social engineering is not the same as borrowing the equivalent to fight a war for national survival. The long term effects are known to those who lived through the 70's.
What I will speculate is that the old saw that " a neo-Conservative is a Liberal who's been mugged by reality" will be truer than ever when the Millenials have to start paying for the social engineering schemes. Especially those that don't benefit them in any way.
MikeF| 6.2.09 @ 2:46PM
Whoa!!! Eric, Dave, Mike and others, take a step back and look at history. The answer has always been lower taxes and lower government spending , not the opposite. Lower taxes brings in higher tax revenues from increased production and other sources (seemingly illogical but true). Reduced government spending requires less of the increased revenues being used to pay expenses thus creating a surplus. The surplus is used to pay down debt thus decreasing expenses further by reducing interest costs. This increases the surplus thus allowing one to pay down more debt. And the cycle continues. This isn't rocket science this is business 101. Unfortunately, there aren't very many quality businessmen in the Legislative or Executive branches of government.
Robert Rosencrans| 6.2.09 @ 3:23PM
During World War II, the American economy had many vestiges of manufacturing present. In the last 40 years just about form of manufacturing has been run out of this country either due to diversity requirements or environmental issues.
You can't create wealth out of thin air. FDR actually had something to spend his money on, American jobs. Obama's trillion dollar fantasy is an attempt, as Obama has stated himself, to create or SAVE 3 million jobs. That's a ludicrous statement when you consider he's spending 2 trillion to create those jobs.
That's expensive. Look at GM. The management is claiming that 12 million units will turn their situation around. Since the profit margins on automobiles are falling, it's more likely 16 million units needed. GM sold 3 million cars last year. At that rate GM would have to have 5.5 years of excellent car sales just to pay back the 30 billion in government loans.
In the meantime GM has still has some legacy costs and everyday operational costs. GM has some good car and truck lines, but their heyday is over. So is Chrysler's.
The national expected number of car sales is now currently 10 million units, down from 17 million units. If you do some math and figure GM sales will fall, that 5.5 year payback rate extends to 10 years. It will take more likely take 14 years or more for GM to reestablish itself. It's highly unlikely that GM will ever be a world leader again. Currently, they are highlighting the fact that they delivered 191,875 units in May, their highest month this year. It's hard to predict an exact number, but they will be lucky to hit 2 million units this year.
In the meantime FDR's spending is hardly relevant to Obama's spending.
Obama has spiked spending up to 25% of GDP at precisely the same time GDP is collapsing. That's not good.
In the meantime gold is quietly approaching and soon will pass the $1,000 per ounce threshold. Gold is sending a signal that there is too much spending in Washington. But Washington is tone deaf. Protect yourself now. I predict a stormy September.
Old Texican| 6.2.09 @ 3:28PM
MikeF
Your history is sound! .....but
I truly believe our enemies are turning their grasp of history...into the defeat of liberty and prosperity.
I truly do.
I truly believe our own elected leaders need us to be serfs.
MikeF| 6.2.09 @ 3:56PM
Old Texican
I can agree with you. However, I do not think those who believe the opposite of us have a very good grasp of history. For example, the elites and the media say that President Obama is very bright. Yet he looks back at the Bush presidency and comes to the exact wrong conclusion. He, and his liberal supporters,conclude that the tax cuts were the problem. The tax cuts produced huge amountsof new revenue. Spending was the problem. Bush and the Congress not only spent all of the new revenue but even more resulting in deficits.
So, in a sense, you are correct. The ruling class is apparently not interested in creating a sound and prosperous economy based on strong fiscal policies. Therefore, they must have another goal and that goal is dependency.
History also shows that countries whose citizens are ultimately dependent on government become slaves to that government and live a life of poverty while the ruling elite live the life of luxury by taking away almost all the the rest of the polulation earns in taxes and fees.
Old Texican| 6.2.09 @ 4:22PM
Hi Mike
Good thought.
I don't know of course where you live in the country, but here in Texas...we shall never be dependent upon..... non-Texans/Americans.
I guess that Dubyah came from that mind-set. He could never imagine the American people bowing to...ANYBODY!
We Texans never shall...heh!...and we process, import, and develop all the oil/gas/diesel.
We also grow enough food here.
(shhh, if you are one of the "free" guys...get you and your family here.) I personally will bust my personal arse to plug you in to a good job.
If you make that decision...let me know here, and I shall contact you.
Bottom line, we need a "base" and Texas works just fine.
PS: don't honk your horn in traffic here. 80 some odd percent of us are "packin'" heh. Sure does promote politeness.
Walter| 6.2.09 @ 4:53PM
I just keep thinking back to lines from George Orwell's 1984.
The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power. Not wealth or luxury or long life or happiness: only power, pure power. What pure power means you will understand presently. We are different from all the oligarchies of the past, in that we know what we are doing. All the others, even those who resembled ourselves, were cowards and hypocrites. The German Nazis and the Russian Communists came very close to us in their methods, but they never had the courage to recognize their own motives. They pretended, perhaps they even believed, that they had seized power unwillingly and for a limited time, and that just round the corner there lay a paradise where human beings would be free and equal. We are not like that. We know that no one ever seizes power with the intention of relinquishing it. Power is not a means; it is an end. One does not establish a dictatorship in order to safeguard a revolution; one makes the revolution in order to establish the dictatorship. The object of persecution is persecution. The object of torture is torture. The object of power is power."
Walter| 6.2.09 @ 4:55PM
Here's another one:
We shall abolish the orgasm. Our neurologists are at work upon it now. There will be no loyalty, except loyalty towards the Party. There will be no love, except the love of Big Brother. There will be no laughter, except the laugh of triumph over a defeated enemy. There will be no art, no literature, no science. When we are omnipotent there will be no need of science. There will be no distinction between beauty and ugliness. There will be no curiosity, no enjoyment of the process of life. All competing pleasures will be destroyed. But always—do not forget this Winston—always there will be the intoxication of power, constantly increasing and constantly growing subtler. Always, at every moment, there will be the thrill of victory, the sensation of trampling on an enemy who is helpless. If you want a picture of the future, imagine a boot stamping on a human face—forever."
Thom| 6.2.09 @ 10:32PM
One thing that gets left out of the WWII comparisons is what the result of that spending produced? Anyone know? It created demand for products that no one else was left in the world to produce. Think of it in a business sense. We created a very large specialized Sales force and program that ultimately cost us $288 billion dollars or 40% of our GDP. Had there not been a demand for goods and services to offset that cost we would have gone back into the Depression. The Demand was the result of our Sales Force penetrating new markets and crushing the competition literally. We lived off the extra ordinary world wide demand for goods and services for two decades. There is no such market potential here. We don’t even have the energy required to support such an after spending spree. No one outside the US can afford our goods and services. When the spending spree has runs its course the economy will contract again because the demand is artificial and aimed at subsidizing the failure that got us into this in the first place and second because the fundamental incentives for wealth creation (risk and reward) are subject to being punished by a government that is growing not facilitating the growth of the private sector. Think of it as our version of the Soviet 5 year plan. They all failed to produce sustainable wealth and growth outside of government.
Todd| 6.3.09 @ 12:00AM
As a proud member of the Facebook group Paul Krugman is a moron, let me say Paul Krugman is a moron and a very ugly one at that. Unfortunately, him and the Obama administration are intent on ruining the dollar and burying all of us in a mountain of debt in their desire to control all the levers of power over the greatest economy the World has ever known. If people do not wake up to this by the 2010 elections, it might be too late to prevent the catastrophe that awaits this utter irresponsibility and despicable power grab under BHO. It is already guaranteed to be a fiasco of epic proportions at this point but the point of no return can still be avoided. If Obama gets two terms, this country as we have known it is finished.
ARealist| 6.3.09 @ 3:24PM
If massive govt. deficit spending is effective than California today would be the wealthiest place on earth.
I believe they are bankrupt.
WWII created demand for goods, which motivated massive increases in production to meet this demand.
The govt. spending during the war did NOT create the demand; the demand PRECEDED spending. Spending had to increase to enable industry to expand and produce products to meet wartime demands.
Obama's plan is the reverse. Demand has fallen off a cliff because of massive indebtedness of the populace. Krugman believes that you can CREATE DEMAND today, merely by borrowing from future earnings.
Further, he believes that this borrowing at the federal level (and state levels) can be accomplished by printing money .
Only a total idiot - or a socialist or communist - believes this stupidity.
History has amply demonstrated that you cannot borrow and spend your way to prosperity. It has never worked and will never work.
If this strategy worked, the NEW DEAL would have ended the Great Depression within a couple of years, and LBJs notion of massive spending to fund "guns and butter" would have produced massive economic growth and wealth; it produced stagflation and unemployment.
Economists produce theories that coincide with their political proclivities. A socialist/communist economist - like Krugman - therefore believes that massive govt. spending and programs will better society and produce prosperity.
A conservative economist will arrive at opposite conclusions.
Imagine that (real) scientists believed that the composition of water varied as a function of their political beliefs. Or that the acceleration of gravity (at the earth's surface) was dependent on ones political views.
You can see the idiocy of this.
WELCOME TO ECONOMIC "SCIENCE" !!!
With precious few exceptions, the genius economists at the FED, MIT, Harvard, Wharton, Berekeley, etc., ALL missed the coming train wreck.
They still debate the causes of the Great Depression and the effectiveness of the New Deal.
They cannot predict interest rates 6 months hence.
They disagree as to the correct level of taxation - and the form it should take - to maximize economic growth and revenue.
They have attempted to mimic the hard sciences by utilizing advanced mathematics (and theorems) to explain the economy.
All to no avail.
The great physicist Richard Feynmann came up the description of a "cult science;" which is the best description of economics.
Basically, it is a joke.
Adam Smith and very few others were the greatest economists. Today's economists are all wrapped up in mathematical formalities and proofs that blind them to the real world, and enable them to "prove" anything they want- especially if it provides a result consistent with their political ideology.
The Argentine defaults, the Weimar Republic, the hyperinflation of present day Zimbabwe all show the same result.
If you incur massive deficits that you cannot afford, and attempt to pay for them via the printing press, you will produce a disaster.
Welcome to the economics of Obama and Krugman.
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