Contributors

Thursday, September 15, 2011

The Last Resort

A key point that needs to be made in as president attempts to get his jobs bill passed is that federal government spending is spending of the last resort. This idea will bounce off most of the right these days. Sane people (such as myself) can't hope to pry the base's irrational fear from their cold, dead minds.

But it needs to be said anyway and I'm happy that former Labor Secretary Robert Reich said it in a recent piece in my local paper. In fact, he said a great deal of things which made complete sense. Of course, this means that nearly everyone on the right will hate it immediately.

Let's take a look at a few of Reich's comments.

Tax cuts, we know, don't have a huge multiplier effect because people in times of economic stress tend to use tax cuts to pay off debt or to save, rather than to spend.

Hence the reason why tax cuts really don't work most of the time.

The main motivation for businesses to hire is customers. Consumer spending is 70 percent of the economy. If consumers are holding back because they are under water with their mortgages and they are worried about losing their jobs, they don't have the cash to spend.If you've got the private sector, businesses and consumers, unwilling to spend, where do you look? Government is the spender of last resort. ... If government can't do it, we are not going to have a recovery.

Exactly. So, it's not the panic mongering myth of "uncertainty." Businesses simply don't have customers and most of these potential customers have less and less money to spend. This is why I state continually that less people having more money is a very bad thing for the overall health of our economy. Sooner or later, the greed at the top will be their own undoing and ours as well.

We are losing ground [to other countries] on education. We're losing ground on labor unions. And we have a politics that has been quite regressive, favoring privatization and deregulation. ...The only way out of this is not only a sufficiently high stimulus, but also addressing inequality through stronger education, stronger labor unions and tax reform.

I agree with everything here except the high stimulus. I think he underestimates the effect that short term debt to GDP will have in relation to our standing in the world.

But here's the best part

This isn't a zero-sum game. A lot of wealthy people are beginning to understand that they would do better with a smaller percentage of a rapidly growing economy than with a big chunk of an economy that's dead in the water.

Yep. And his mention of the zero sum game idea made me grin from ear to ear.

8 comments:

6Kings said...

Tax cuts are not a short term quick fix but they do lay the foundation for additional consumer spending. That is if people don't feel like the rug is going to be pulled out from under them.

And lo and behold..

Consumer spending is at an all time high now and has fully recovered from the recession.

Now if you actually read the post and the linked post from Greg Mankiw, you would see your post is completely at odds with their opinion and the relevant data.

Uncertainty and Regulation are MAJOR drags on this recovery. They way out is NOT what the pResident, democrats, or you have advocated.

Juris Imprudent said...

Sane people like yourself - and all who disagree with you are mental cases.

You define sanity about like Soviet psychologists did.

patty said...

Yes, deregulation is the answer because it worked so well in the past what with both the Great Depression and the Great Recession and all.

Juris Imprudent said...

Hello patty - what "deregulation" are you saying was involved in the Great Depression?

Anonymii will be ignored said...

"Sane people (such as myself)"

So anyone who disagrees with you is insane?

The laughs just keep on coming! I've got to start coming here every morning just to snort my coffee at the monitor.

Pop said...

"The laughs just keep on coming!"

Pathetic and nervous denial geared towards the continual maintenance of proving Mark wrong and winning the argument.

Anonymous said...

Solyndra anyone???

I don't think this administration is capable of making any financial decisions.

Anonymii will be ignored said...

Wait a minute Pop.

Pathetic and nervous?

You may want to look those words up in the dictionary, because I do not think they mean what you think they mean.

Why do you assume I disagree with Mark? I merely commented on his assertion that everyone that disagrees with him is insane.