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News-Sentinel.com Your Town. Your Voice.
Opening Arguments

What's that in the road, a head?

Gee, do ya think?

But Republicans have a competing argument. Instead of saving us from a Greater Depression, the Obama stimulus (together with his health-care plan and financial reforms) was a two-year waste of precious time and money that may actually have impeded economic growth.

[. . .]

To be sure, the economic disaster that led to the longest recession the United States has ever suffered was something Obama inherited, but there is no question everyone (on all sides of the aisle) believed that natural cyclical forces would have led to recovery long before now. Natural cyclical forces were not given a chance to work themselves out.

And now the president proposes . . . more of the same. Ta da!

Comments

William Larsen
Tue, 09/27/2011 - 11:29am

The last general budget surplus was in 1957. There have been continual deficits every since. Since that time we have had booms (recovery) and busts (recession). During the recession, congress seems to come up with some stimulus plan to get the economy growing. My question has always been, does/has it worked?

Recessions come about because there is not enough demand to buy the goods and as a result people are laid off until demand returns. Demand dries up because people either lack the resources to buy goods and services or they lost their jobs and are conserving their resources. Personal debt has increased since the 60's. As debt increases, it decreases the ability to buy because interest (friction) reduces buying power.

Government steps in with a stimulus package, borrows money and puts money into the economy. But the money has never been repaid. The borrowed money just gets refinanced when the bond comes due. Cash for clunkers brought future sales forward; energy tax credits brought future sales forward; first time home buyers credit brought future sales forward. When population growth was increasing, this cost was justified because of a growing economy (more people). The problem is, we have been at basically zero population growth since the late 70s' early 80's with the only growth due to illegal legal immigration. We are passing more debt onto a smaller increasing population which is strangling the economy.

At some point the debt has to be repaid or a loss taken. A loss trickles all the way down. Small periodic loses are easier to absorb. Stimulus creates the illusion that everything if fine and the responsible parties are saved from having to take their loss. Therefore, losses keep accumalating in the form of stimulus and ebt.

The world has created an economic house of cards.

Harl Delos
Tue, 09/27/2011 - 9:15pm

Money is a fiction, representing resources. When the feds engage in deficit spending, it isn't borrowing resources from the future, but using today's resources. In fact, we're not borrowing; we ARE paying for that spending, but we're paying a hidden inflation tax instead of some explicit excise, income, payroll, franchise, sales, or other tax.

And deficit spending does not stimulate the national economy, it stimulates the world economy. We can't afford to do that, any more than we can afford to be the world's policeman.

Inflation DOES stimulate the economy, especially when the problem is deflation, such as we have experienced with our housing market. If people think their dollars will erode if they just sit in a bank account earning 1/2% interest, they'll make growth investments instead - and those investments create jobs.

However, rather than thinking in terms of stimulation, we really should recognize that we need safe and efficient roads for a robust economy, and if we have construction workers sitting idle, now is the time to fix things up. If we wait until the economy is robust, competing for those limited resources would cost us a lot more.

Smart, conservative farmers don't sit on their butts all winter and moan that they can't raise crops. They do a valve job on the tractor, rebuild the hydraulic cylinders on the disk, repack the wheel bearings on the grain wagon. To everything there is a season - and during the winter of our national economy, we should be working on infrastructure.

William Larsen
Wed, 09/28/2011 - 9:54am

Money does not represent resources, but is a perceived value. When people lose faith in a currency, it

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