Akvod said:
So it's all just your fucking word play. Let me ask you, if there is a 100 billion dollar recesionary gap in the economy, there is a MPC of 0.5 (for now, just assume everyone has the same MPC), then will not a increase in government spending of 50 billion dollars close it? Yes or no? If yes, then we agree on the only thing I was talking about. I have no fucking say on the "true" nature of recovery. I'm only going to stick with what I learned, and the objective measurement of the economy, rGDP, how much shit we produce. I can go on and say how this is to expediate the return to consumer confidence (if the economy is doing as or nearly as good, and they're still getting pay checks, they will think their life time wages are the same, and will return. Plus, if the stock markets rebound, their wealth will increase again), but still, that's beyond my point. Can not, an increase in G, increase GDP? I don't give any shit about whatever else you say. Our economics classes don't try to theorize what's "true" recovery. My true recovery is to get the country to produce as much as it can before the recession. Output=Income. If the output is the same, income is the same, people feel that their life time wages are secure. In addition, there'll be a recovery in asset values. Therefore, eventually, Consumer consumption will go up, in which case we can cut back on government spending. And yes, consumer confidence is indeed "illusions". Even though nominal wages are the same, people spend less than they could. We want them to spend just as much as they would before the recession. You may say that it's rational or reasonable to start saving whenever there are bad times. This is the Paradox of Thrift. |
Asking me if Government spending can increase GDP is a lot like asking if A used car salesman takes out a loan to buy his own cars from a dealership does that increase his buisnesses revenue.
Does it increase his revenue? On the books it does. In reality though, it doesn't change anything. It's no different then asset trading and things Enron did. It doesn't fix or change anything. It just looks good and slows down the REAL recovery that won't disapear as soon as you pull out the carpet of government spending. It DOESN'T cause a recovery in asset values, and it doesn't cause consumer consumption to rise. It just increases GDP... and in some cases pushes Consumer demand foward but in doing so ends up delaying the recovery even more. For example when they offered all those tax credits to buy cars and stuff like that. All it does is push demand foward, and make it so demand crashes when you pull that incentive away. There is no way to "cut back on government spending once demand comes back" because the demand is artifically created by the government spending... it's not really back. It's gone once you lower said government spending. Just how my taking out a loan so people buy my cars with my money doesn't increase consumer demand. It increases consumer purchases... but once I stop giving out free cars i'm back to where I was! It's purely artificial.
Heck, look at the Great Depression and FDR... and notice that what took us out of it was NOT government spending but rapidly increased foreign demand... FDR killed all local buisness. If WW2 didn't happen, he'd of destroyed our economy worse the Hoover.
This is why pretty much no Economosts believes in Neo Keynesian Economcis anymore. You know, it actually SLOWS the real recovery. You end up with recessions after the government spending stops.
