Keep in mind Gas Man, I'm not asking the government to do anything different from what they have done your entire life. What we are doing now is something we have not tried for 75 years. It will always fail and we'll always be waiting for the next World War to get the government to spend enough money necessary to continue growing the economy.
When Government Grows, the Economy Shrinks
By Veronique de Rugy
In the midst of the European debt crisis, economists at the European Central Bank just produced a paper that looks at how growth in the size of government affects economic performance. The authors, António Afonso and João Tovar Jalles, provide “evidence on the issue of whether ‘too much’ government is good or bad for economic progress and macroeconomic performance, particularly when associated with differentiated levels of (underlying) institutional quality and alternative political regimes.”
Here are some key findings.
Basically, an increase in government spending (whether financed by taxes or by borrowing) reduces economic growth. This is consistent with a paper from a few years ago by Harvard Business School’s Lauren Cohen, Joshua Coval, and Christopher Malloy. To their surprise, those authors found that federal spending in states caused local businesses to cut back rather than grow.
Another interesting finding from the ECB paper is the positive role played by institutions on growth.
By Veronique de Rugy
In the midst of the European debt crisis, economists at the European Central Bank just produced a paper that looks at how growth in the size of government affects economic performance. The authors, António Afonso and João Tovar Jalles, provide “evidence on the issue of whether ‘too much’ government is good or bad for economic progress and macroeconomic performance, particularly when associated with differentiated levels of (underlying) institutional quality and alternative political regimes.”
Here are some key findings.
Basically, an increase in government spending (whether financed by taxes or by borrowing) reduces economic growth. This is consistent with a paper from a few years ago by Harvard Business School’s Lauren Cohen, Joshua Coval, and Christopher Malloy. To their surprise, those authors found that federal spending in states caused local businesses to cut back rather than grow.
Another interesting finding from the ECB paper is the positive role played by institutions on growth.
I hope someone in Washington is listening — or reading this paper.
Yes but Akphi, I have discussed this before with you. One of the biggest flaws in Keyens economics is that is does not take a major factor into the equation which is human emotion.
The one example Keyesnsians point to as a success story for the United States is WW2. The only problem is, during that time people were in a much different mindset. Men were going to war to die, women were working to support the families, many just working for food vouchers. Could you imagine trying to convince people on welfare today that they have to work to get their food stamps? Laughable.
The economy is not free of human spirit. There are shit loads of money available, the stock market is going nuts. Then why is no one spending their money? Simple answer, fear. The fear of government tyranny and the demands of self preservation. When the economy was booming under Bush, there was a money spending and money making fever...I remember wondering "Why the fuck am I not buying and selling houses?" I had several friends who made bank doing this. And with every major transaction that took place, guess what...taxes were assessed.
You see, as a conservative, if Obama was to come out tomorrow and announce that income taxes were going to drop, and that they were going to cut welfare, social programs, gross military spending, bureaucratic bullshit, etc...I would rejoice, and so would most of the people of whom Obama despises..and I promise you, they would begin dropping their dollars on all kinds of shit.
This is a flaw in your theory. The theory works, just plugging in numbers, but it is self limiting. At some point, when the tipping point hits (the next crisis), we are going to be in deep, deep shit..and no amount of spending valueless money will matter.
The one example Keyesnsians point to as a success story for the United States is WW2. The only problem is, during that time people were in a much different mindset. Men were going to war to die, women were working to support the families, many just working for food vouchers. Could you imagine trying to convince people on welfare today that they have to work to get their food stamps? Laughable.
The economy is not free of human spirit. There are shit loads of money available, the stock market is going nuts. Then why is no one spending their money? Simple answer, fear. The fear of government tyranny and the demands of self preservation. When the economy was booming under Bush, there was a money spending and money making fever...I remember wondering "Why the fuck am I not buying and selling houses?" I had several friends who made bank doing this. And with every major transaction that took place, guess what...taxes were assessed.
You see, as a conservative, if Obama was to come out tomorrow and announce that income taxes were going to drop, and that they were going to cut welfare, social programs, gross military spending, bureaucratic bullshit, etc...I would rejoice, and so would most of the people of whom Obama despises..and I promise you, they would begin dropping their dollars on all kinds of shit.
This is a flaw in your theory. The theory works, just plugging in numbers, but it is self limiting. At some point, when the tipping point hits (the next crisis), we are going to be in deep, deep shit..and no amount of spending valueless money will matter.
demand drives the economy... the Government can create that demand like they have for the past century if politicians will allow them
@)
Epically stupid.
Demand doesn't drive "the economy" and the government doesn't drive any demand. It never has.
Ever.
As to your continued retarded assertion that the government isn't spending any money, Spending per/GPD last four year, Rank 4th,5th,7th, 6th highest spending in last 110 years, and including federal, state and local spending: The Longest streak of government spending over 40% of GDP was in 2012 at 4 years in a row.
You are a simpleton and a liar.
@)
Epically stupid.
Demand doesn't drive "the economy" and the government doesn't drive any demand. It never has.
Ever.
As to your continued retarded assertion that the government isn't spending any money, Spending per/GPD last four year, Rank 4th,5th,7th, 6th highest spending in last 110 years, and including federal, state and local spending: The Longest streak of government spending over 40% of GDP was in 2012 at 4 years in a row.
You are a simpleton and a liar.
demand drives the economy... the Government can create that demand like they have for the past century if politicians will allow them
@)
Epically stupid.
Demand doesn't drive "the economy" and the government doesn't drive any demand. It never has.
Ever.
As to your continued retarded assertion that the government isn't spending any money, Spending per/GPD last four year, Rank 4th,5th,7th, 6th highest spending in last 110 years, and including federal, state and local spending: The Longest streak of government spending over 40% of GDP was in 2012 at 4 years in a row.
You are a simpleton and a liar.
Of course demand drives the economy, lol. You'd have to be a retard to think otherwise... oh wait, I forgot who I'm talking to.
I'll add that it is beyond dishonest to pretend that a temporary 1 year slowdown in spending after a massive spike constitutes "austerity" [if you spike spending in one year with a gigantic stimulus bill, and then fail to repeat that lunacy in the subsequent years (and fail you must, because we couldn't afford it in the first place), then this metric will point downward dramatically]
Government spending as a % of GDP is higher than it was in the Bush years, and it was higher in the Bush years than it was in the Clinton years. The government is growing, not shrinking.
Government spending as a % of GDP is higher than it was in the Bush years, and it was higher in the Bush years than it was in the Clinton years. The government is growing, not shrinking.
Your creating a false reality and using your conjecture as the basis of an economic theory. Human emotion is so subjective. Anyone can create an economic theory based off their perception of human emotion. The fact of the matter is people spend money when they make money and people invest money when they can make more in return. Taxes have been much higher than they are now yet people still invested, created jobs, businesses, etc. So the excuse that people aren't investing or spending right now because of income taxes is absolutely ridiculous.
And your claim that WW2 is the only success story is false, the California Gold Rush, WWI, and Reagan were other examples of large increases to our fiscal situation that resulted in positive growth. The one thing we have never had in our history was a reduction in spending and the money supply that resulted in long term economic growth.
Taxes are barely above what they were during the Bush years yet people were buying and selling homes like crazy. Why was that? Because of profit. So your claim that people "fear" the government right now is insane. The biggest threat the Government has posed is potentially bringing taxes back to the Clinton years, lol. If you think people aren't building houses or spending money because a 3.6% tax increase, that's ridiculous.
We've experienced economic shocks before, it's not like a new phenomenon. We have increased government spending by much more than we have now and the economy has done perfectly fine. So your theory does not exist. What we are doing now has not happened in the past century yet you are saying that it's the cause of fear. That's bologna. People will spend money, build houses, start businesses, etc when there are people out there willing to buy their shit. Demand drives the economy. I'm not asking the government to do anything they haven't done in the past century... you guys are the ones asking for that.
Business spending on capital goods, new technology, entrepreneurship, and productivity is more significant than consumer spending in sustaining the economy and a higher standard of living. [FONT=myriad_proregular]
Consumer spending is the effect, not the cause, of a growing & healthy economy [Investment drives growth. Increased private investment – made in response to existing markets or emerging opportunities – creates new jobs, which increase income, which leads to greater demand for goods and services]
Also note that productivity improvements can yield higher wages, profits and levels of capital investment. Which feeds the cycle described above.
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Consumer spending is the effect, not the cause, of a growing & healthy economy [Investment drives growth. Increased private investment – made in response to existing markets or emerging opportunities – creates new jobs, which increase income, which leads to greater demand for goods and services]
Also note that productivity improvements can yield higher wages, profits and levels of capital investment. Which feeds the cycle described above.
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