12-02-2016, 03:18 PM
(12-02-2016, 02:05 AM)Warren Dew Wrote: Actually government spending is the least effective way to try to stimulate the economy. The problem is that spending stimulus is inflationary, which means that you have to cut back on monetary stimulus to avoid excessive inflation.
Why is monetary stimulus not inflationary, and spending stimulus is? No, government spending stimulus has always worked. It worked in the thirties, because right after the New Deal there was a modest recovery, and a bigger one after the big war. There was a modest recovery in 2010 that was cut short by Republican policies. Government spending pumped up the economy in the sixties and reduced poverty.
Quote:Supply side stimulus such as cutting tax rates in concert with monetization of the debt is the best form of stimulus; supply side stimulus is deflationary, permitting application of additional monetary stimulus. Tax rate cuts are especially good as they increase the incentive to work and thus increase the labor market participation rate, which is particularly critical when the economy has a lot of retirees to provide for.
I don't see how you can keep cutting taxes, without raising them again later. Tax cuts to the non-wealthy might have some stimulus benefit, but the resulting debt has its dangers too as I mentioned. It's the same with interest rate cuts as stimulus. There's nothing left in the tank now. When Trump causes another recession after 2018, there will be no tools left to help us out of it.
The tax cuts didn't work because they were focused on the wealthy, who don't work but only push papers and fire people. The rich don't need more motivation.
Quote:But perhaps the most important issue is that government spending is generally in the form of payments to large corporations, so it adds to wealth inequality. Across the board tax rate cuts, in contrast, benefit the workers, and thus tend to decrease inequality.
Except that the times when inequality vastly rose, were the years leading up to 1929, and the period from 1980 to today, when tax cuts were the policy.
Hoover tried to increase government spending to large corporations. That didn't work. Spending needs to be focused on direct benefits to the people and for the infrastructure the economy depends on. Government spending that puts money in peoples' pockets that way gets the economy moving.