Poll: Government Spending Philosophy

[tw]

Originally Posted by Undertoad

Keynesian economics, if the economy is shrinking then government should (probably) increase spending to alter the equation of moving money, and then, government should (probably) cut spending when the economy is growing.

That is the obvious solution when assuming economies are open loop. But reality is closed loop. What did Clinton do to later cause economic prosperity? He raised taxes.

Simplistic thoughts assume A results in B. We see this especially in electronics. When A caused B causes C causes D causes E causes A, then nothing is obvious anymore. A decrease in C causes an increase in A resulting in completely different reactions from A to B. A major difference always exists in open loop and closed loop solutions.

In economics, sometimes increasing taxes or spending can make things better or worse.

The massive late 1970s economics malaise created by 1968 Nixon and Vietnam was solved by massive interest rate hikes and a resulting removal of money from the economy. Unfortunately nobody had the balls to do that until Carter and Volker did it.

The massive 2007 economics malise created by George Jr's Mission Accomplished, et al was solved by massive monetary infusions resulting in money that had virtually disappeared.

Each economic malise is unique. Until details of a recession are known, then best is to inject more or less money. Nobody can say more without extensive details.

Bernanke saved our ass. He said he would not repeat mistakes of 1929 when government did so much harm by installing fiscal constraint. Sometimes injecting more money (ie 1970s) can make things worse. But Bernanke did the right thing so that 40% of jobs were not lost. He injected more money saving our economy. The devil is in those details.

Same applies to taxes. Sometimes tax cuts are good. Other times a tax increase is better.

[Urbane Guerrilla]

Originally Posted by tw

That is the obvious solution when assuming economies are open loop. But reality is closed loop.

That's what the Club of Rome thought, and Dr. Paul Ehrlich as well. Their modeling was consequently wholly inadequate, particularly in regard to India, which they predicted would be a depopulated desert solely due to population pressure followed by a population crash basically from economics. You could reread The Population Bomb to check their assertions.

But the economy and the population seem both to be not closed, but open. Neither is zero-sum. Assuming an economy is zero-sum, which looks to be the rest of your argument, is what causes socialism and all the concomitant syndromes and flawed thought flowing from it. It's pretty bad when flawed thought's effects are lethal to the tune of 167.5 million souls dead untimely or by violence, isn't it?

Now if you reject socialist and zero-summed ideas, you do much better, yours do much better, and it naturally follows therefore that everyone does much better. Nothing seems to stop the creating of real wealth -- so there's damned little point to devoting general society-wide effort to organizing scarcity. You do need the breadth of vision and lack of obsessions to see that, though. You can get there by reading if you are'nt obsessed.