[quote=harvey]
Government debt can be used for investment also. (In theory, all government “spending” is really investment, but it’s hard to determine the ROI.)
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Actually it’s relatively easy but most people for government spending don’t like the answer it provides so they ignore it or claim it’s hard to determine.
GDP includes government spending so for every dollar of debt the government takes on there should be a corresponding increase in GDP, but for the last 30 years GDP growth has been less that government debt growth. This means that the ROI of government spending has been negative for most of those 30 years. Just look at last year where GDP grew by about 2% or $300 billion vs an increase of government debt of 1.2 trillion. A massive negative ROI.
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How do you increase demand? There is no absolutely proven answer, but Keynes provided us with the best one we’ve got: Start spending money on useful things.
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And yet our government has not demonstrated that ability at all for the past 30 years. Your argument seems to be that if private companies won’t spend their capital then we must have the government confiscate it and spend it. Should we confiscate your retirement account and spend that too. Can’t have people saving for the future we must stimulate demand by buying more stuff we don’t need right now. We must do everything and anything to stimulate the demand side of the equation.
We’ve been trying this for years, have seen the failures and yet we keep arguing for more, more, and more spending. Trust me it will work this time, I know it didn’t work the previous 50 other times but this time it will work.