[quote=SK in CV]
If all deficit spending is stimulative, then all government spending must be stimulative. If you have a $100 deficit, you can’t identify which $100 suddenly is stimulative. But the response is no, all deficit spending is NOT stimulative. Only increased spending is stimulative. And only required under Keynsian theory if private spending has dropped.
Arguing that we’ve tried it before and it hasn’t worked is simply not true. Stimulative spending does work. What has not happened is cutting spending and raising taxs in good times. (See tax cuts, increased spending from 2002 to 2007.) You can suggest cutting spending all you want. It can’t be stimulative. It won’t work.[/quote]
Now your starting to see the problem we’ve developed over the past 30 years. Once you start stimulative spending you can never stop that spending. If stimulative spending worked you’d get to a point where you could stop doing it, but we never get there, we just keep increasing that spending.
It’s obvious to everybody that if we cut government spending that GDP will shrink. No one is going to argue that fact. The point is that when you cut spending, stop bailouts and let the debt liquidate you get to a stable economy that can grow again. It’s from a lower level but historically we’ve been quick to recover once that debt overhang is eliminated. Exponential growth forever can never work, sometimes you’ve got to reset the starting point.
Civilizations rise and fall, companies rise and fall, it’s a natural lifecycle when you’re dealing with exponents. Ideally you let this economic cycle play out before it gets so incredibly big, but we think we can avoid this economic cycle forever. Well at least until the next election.
