Krugman: Spend Now, Save Later

[axt113]

richardhutnik said:

axt113 said:

The key problem is that companies will not hire until they see consumers return to spending en masse, without the need for big discounts, right now that isn't there, spending has increased, but consumers are still being careful with their expenditures and demanding big discounts for their business, for businesses, this means that they are going to be hesitant to invest, or hire, and any money they get through tax breaks, etc. will just go into shoring up their financials, can't really blame them, because they want to make sure that if the economy slides again, they can weather the storm, but if they don't hire, then people are going to remain hesitant with their spending, kind of a catch 22 type deal, which is why government expenditure is needed until companies start hiring and people get back to spending.

Consumers have maxed out all their available sources for credit.  They aren't going to return.  And how exactly is government spending, driving up the deficit to record levels going to address the issue of consumer spending?  Why would a business expand to take government money, when consumers returning en masse is what counts?

A few reasons, not all businesses sell directly to the consumer market, this is where the government can influence the economy, construction, defense, other contracting, etc. etc., not to mention, government hiring, this results in people being hired, because as companies gain contracts, or government expands, they need more workers, this results in people having more income and a greater ability to spend, this fuels consumer spending, because when someone has a stable source of income, they are more willing to buy, this encourages companies to produce goods and services, and as demand grows, even expand production and investment, meaning more jobs.