• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

What makes people think cuts in government spending boost the economy?

David_N

DP Veteran
Joined
Sep 26, 2015
Messages
6,562
Reaction score
2,769
Location
The United States
Gender
Male
Political Leaning
Liberal
Question for discussion. Where has this idea come from?
C+I+G+(E-I)
How does cutting G when the economy is experiencing slow growth help anything?
For example, here is Australia:
Australia enters the deflation league of sorry nations | Bill Mitchell – billy blog

Pathetic.

Meanwhile, in Spain:
Spanish government discretionary fiscal deficit rises and real GDP growth returns | Bill Mitchell – billy blog
I don't even need to discuss the failure of Austerity and the horrific actions of the IMF.
 
And for the record: Tax cuts for individuals who spend most of their income will indeed lead to a boost in consumption, which does boost the economy. But this will contribute to a larger deficit, which isn't a bad thing.
 
Japan is an example of what happens when an economy desperately needs sales and people to stop saving.
When easing gets hard | The Economist
Stupid stuff like this...
+
Since introducing an interest rate of -0.1% on excess bank reserves..
Click to expand...
THIS ISN'T GOING TO MAKE BANKS LEND!
Japan helps show the failure of relying on Monetary Policy.
Worse, Japan is once again mired in deflation.
Click to expand...
Not so easy to get Inflation..
 

I don't think anyone actually ever said that cuts in spending boost the economy but we do need to get our financial house in order and not run up debt that becomes an ever larger percentage of the spending we have. We're just lucky right now that interest rates are low. Austerity is a big word. If we keep our financial house in order true austerity won't be needed. Just because we cut spending a small degree doesn't really mean we are practicing austerity. Austerity was forced on Greece because they had no other choice. They had already gone past the point where their bubble burst. If they had been fiscally responsible in the first place they wouldn't have needed austerity and don't go giving me any crap about how that situation is different.
 

I unblocked you to respond to this.
I don't think anyone actually ever said that cuts in spending boost the economy
Click to expand...
Really? Good to know that you agree.
but we do need to get our financial house
Click to expand...
The us government, as a currency issuer, is not like a household. Household debt is a very real burden, government debt? Not so much.
not run up debt that becomes an ever larger portion of the spending we have.
Click to expand...
We control how much interest we give to individuals who hold bonds, and it's a political choice to slash other spending. No real constraint.
We're just lucky right now that interest rates are low
Click to expand...
The fed controls interest rates.
Austerity is a big word.
Click to expand...
No, Pseudopseudohypoparathyroidism is a big word. Austerity is a disease.
If we keep our financial house in order true austerity won't be needed.
Click to expand...
Go here: http://www.debatepolitics.com/gover...-going-bankrupt-medicare-social-security.html
Just because we cut spending a small degree doesn't really mean we are practicing austerity.
Click to expand...
Who said we're practicing austerity to the degree that other countries are?
Austerity was forced on Greece because they had no other choice.
Click to expand...
Err, they could've abandoned the euro and moved to their own currency. Or the IMF could stop decimating Greece and other countries.
If they had been fiscally responsible in the first place they wouldn't have needed austerity and don't go giving me any crap about how that situation is different.
Click to expand...
If they had never given up their ability to control their own currency, they'd be in a much better spot.
 

Spain already has entire ghost towns with infrustructure and a few airports that were built during the height of Spains property bubble.

All empty, never used.

Its a example of the Keynesian " build it and they will come '' mentallity run amok.

Spain's Ciudad Real airport sold at auction for €10,000 - BBC News
 

What does this have to do with the fact that Spain's Gdp growth has returned thanks to an increase in its fiscal deficit? And you can't deny that those projects that are now abandoned did indeed lead to thousands employed, etc, etc.. Now, what makes you think Keynesians believe anything of what you claim? Than again, you argue from ideology and simply scream TEXAS TEXAS TEXAS.
 

You screamed Texas, 3 times, not me and I base my ideology on what works which is more than I can say for you.

Yea its easy to increase GDP, just spend yourself into another Soverign debt crisis, just load the banks back up with worthless bonds, create more empty towns with unused infrastructure.

Arbitrary spending "to increase aggregate demand " led to Spains ghost towns and airports, the last thing they need is more empty streets and apartment buildings.

And GDP our of context is a piss poor way to judge the health of a economy. Even MMTers should understand that.
 

You screamed Texas, 3 times, not me and I base my ideology on what works which is more than I can say for you.
Click to expand...
What works? Supply side economics doesn't work.
Yea its easy to increase GDP, just spend yourself into another Soverign debt crisis, just load the banks back up with worthless bonds, create more empty towns with unused infrastructure.
Click to expand...
What debt crisis are we facing?
What worthless bonds? There's a reason they're in demand.
Nothing wrong with some empty towns..
Arbitrary spending "to increase aggregate demand " led to Spains ghost towns and airports, the last thing they need is more empty streets and apartment buildings.
Click to expand...
So they focus on repairing existing infrastructure/other initiatives. Infrastructure spending isn't perfect, but you can't deny the benefits of those few ghost towns/airports for the workers and businesses providing the materials.
And GDP our of context
Click to expand...
What's out of context?
 
David_N said:
And for the record: Tax cuts for individuals who spend most of their income will indeed lead to a boost in consumption, which does boost the economy. But this will contribute to a larger deficit, which isn't a bad thing.
Click to expand...

Not necessarily, you could increase taxes on those with a lower propensity to consume to offset the tax decrease on those with a higher propensity to consume. The net tax "revenue" remains the same, but consumption would increase.
 
pdog said:
Not necessarily, you could increase taxes on those with a lower propensity to consume to offset the tax decrease on those with a higher propensity to consume. The net tax "revenue" remains the same, but consumption would increase.
Click to expand...

I'm talking about something like suspending the payroll tax.
 

Same old broken record but I'm flattered that you had me blocked. Just proves that you want to ignore the truth and live in your own little fantasy world.
 
Moderate Right said:
Same old broken record but I'm flattered that you had me blocked. Just proves that you want to ignore the truth and live in your own little fantasy world.
Click to expand...

I've addressed every one of your points. If you don't want to debate, that's fine...
 

Dave is using his usual tactics of cherry-picking, taking facts out of context and assuming correlation equals causation. He leaves out little details like the fact that cuts in gov't have a LONG TERM effect and only focuses on the short term. He ignores the fact that gov't's do not create wealth, they simply move it around and GDP is about the movement of wealth, not the creation of wealth.
 

Can we get past the fact that our entire infrastructure is in dire NEED of overhaul before we talk about hyperbole like this? Further isnt' a bubble exactly that? A bubble? I suppose you could partly blame the government in the creation of that bubble, but the bubble wasn't caused by deficit spending.
 

Supply side does work. Millions of Americans and thousands of bussineses voting with their feet and moving here, to the GREAT state of Texas prove that Supply side works.

Using incentives to increase private sector investment which leads to job creation is beyond the comprehension of someone who thinks that a Nation could and should spend its way to prosperity

NY and California are both trying to emulate Texas's supply side iniatives by giving tax breaks to Companies that relocate there . NY gives a 10 year tax break to Companies that relocate there so dont tell me Supply side doesn't work, of course it does

And Spain spending led to more than just a few ghost towns. Politicians were actually prosecuted which is what should have happened here.
 
Last edited:
David_N said:
I've addressed every one of your points. If you don't want to debate, that's fine...
Click to expand...

I've heard it all before, many times. The trouble is you guys think that we don't understand your views so if you keep on repeating them then maybe it will eventually sink in to us. It doesn't ever occur to you that we do understand your views and dismissed them as poppycock. But, that doesn't stop you from regurgitating the same old stuff over and over again. All of this stuff has been debated over and over numerous times and both sides are still at square one. We will never convince each other of the error of their ways.
 
I'm not sure people think reduced government spending helps the economy. What they fear is that the temporary advantages of government overspending will finally come to an end and the ensuing crash will be miserable. It doesn't matter who prints the money. You cannot pick money from trees forever. It is not a sustainable activity. Just look at the what has happened to countries who have seen a loss in confidence in their currency.

What does help the economy is a reduction in taxation because it leaves more money in the hands of taxpayers who can spend in a sustainable way. The left wing economics will eventually hurt us badly. It can't be otherwise.
 

Can you explain what getting "our financial house in order" entails and how it will benefit our economy?
 
"Great state of Texas." There's a thread about Texas you should dig up..
Jesus, we have a massive amount of excess capital, and businesses are hoarding dollars. A decrease in taxes isn't going to magically spark investment.
 


Ok, demonstrate evidence of the "long term effect."
 

I understand the fear. What I don't understand is the actual mechanism that would cause such a thing to occur. I can think of no instance where "confidence" is the driving factor for currency value.
 

Can I ask you a question? We agree on what inflation is right? To much demand chasing to little productivity? Can we agree on that? Can we also agree that inflation can happen sectoraly?
 

All very true regarding the OP. I'm still wondering exactly what "people" the OP might be referring to. I don't know of a soul who believes what is described.
 
You must log in or register to reply here.
Menu
Log in
Register
Cookies are required to use this site. You must accept them to continue using the site. Learn more…