Budget slashing crashes economies

Correlation is not necessarily causation I know, but it's not like these are the only data points. There's a whole world history of austerity programs actually aggravating the debt problems they are intended to solve.

http://www.dailykos.com/story/2011/09/30/1021613/-Nobody-couldve-predicted-that-slashing-budgets-crashes-economies?via=siderec

Haha, it's Reaganomics in reverse! Trickle-up?

Here's a thought. Cut in wasteful spending, invest more in useful spending. Tax more where it hurts least (i.e. the rich). Do you really think that heavy cuts in for example military spending or mortgage subsidies would be bad for the US economy?

Originally posted by KazetNagorra
Haha, it's Reaganomics in reverse! Trickle-up?

Here's a thought. Cut in wasteful spending, invest more in useful spending. Tax more where it hurts least (i.e. the rich). Do you really think that heavy cuts in for example military spending or mortgage subsidies would be bad for the US economy?

Yes, if it led to a sudden draw of money from the economy. A gradual decline in spending, keeping inflation in check, and incrementally increasing as the private economy expands - no. But in a time like right now. it would be devastating, and has proven so.

Now, if you wanted to move the capital intensive spending from the military to labor intensive spending towards infrastructure, medicine, etc., that might help the economy certainly. At least until inflation hits.

Originally posted by Kunsoo
Correlation is not necessarily causation I know, but it's not like these are the only data points. There's a whole world history of austerity programs actually aggravating the debt problems they are intended to solve.

http://www.dailykos.com/story/2011/09/30/1021613/-Nobody-couldve-predicted-that-slashing-budgets-crashes-economies?via=siderec

There is a whole world history that the DailyKos ignores. The great depression may not have been as great if not for the efforts of both Hoover and Roosevelt to spend and regulate us out of it.

Ecoonomists of the era including liberal John Kenneth Galbraith called the Rederal Reserves response "shockingly incompetent". Both Hoover and FDR tried to keep prices artificially high inclucing of course labor.

Another key component of government incompetence was Congress passing Hawley-Smoot tariff of 1930. This tariff triggered overseas protectionism and a worldwide contraction of trade.

Professor Peter temion of MIT points to 1987 when the "stock market fell by almost the same amount on almost exactly the same days of the year" but there was no great depression. The Reagan administration left it alone and the market recovered on its own.

Governments almost universally operate contrary to genuine economic principles. They are motivated not by what will eventually work, but by what the voters see immediately.

Originally posted by normbenign
There is a whole world history that the DailyKos ignores. The great depression may not have been as great if not for the efforts of both Hoover and Roosevelt to spend and regulate us out of it.

Ecoonomists of the era including liberal John Kenneth Galbraith called the Rederal Reserves response "shockingly incompetent". Both Hoover and FDR tried to ke ...[text shortened]... They are motivated not by what will eventually work, but by what the voters see immediately.

Governments almost universally operate contrary to genuine economic principles. They are motivated not by what will eventually work, but by what the voters see immediately.

That indicts the voters, not the government.

Originally posted by KazetNagorra
Haha, it's Reaganomics in reverse! Trickle-up?

Here's a thought. Cut in wasteful spending, invest more in useful spending. Tax more where it hurts least (i.e. the rich). Do you really think that heavy cuts in for example military spending or mortgage subsidies would be bad for the US economy?

"Here's a thought. Cut in wasteful spending, invest more in useful spending."

If you'ld have stopped there, I'd be on board. Governments in general are very good at the former, and rarely to the latter.

It must be remembered that the government gets money in one of two ways, both destructive of the economy: taxation or the borrowing or printing of money. There is no tooth fairy, or free lunch. P. J. O'Rourke once quipped to the effect 'if you let people keep their own money, they don't throw it in the bushes.'

We can argue the effectiveness of Bush's TARP, and Obamas stimulus, but it appears most of the trillions of dollars just vanished into thin air. I would not consider taxing anyone more, until there are rules in place to limit spending.
A good start would be to eliminate so called baseline budgeting, which grants automatic increases in spending via continuing resolutions.

Originally posted by JS357

Governments almost universally operate contrary to genuine economic principles. They are motivated not by what will eventually work, but by what the voters see immediately.

That indicts the voters, not the government.

Yes, but economists tend to look at the long range effects of things. Joe six pack is almost illiterate on economics. He sucks up what politicians promise, supported by the frenzy created by the media.

When we keep extending unemployment benefits, it is politiically popular, because immediately it is money in people's pockets. If in the longer run we have created a new class of dependents that are virtually unemployable, an irreparable harm has been done, out of the intention to do good.

Originally posted by Kunsoo
Yes, if it led to a sudden draw of money from the economy. A gradual decline in spending, keeping inflation in check, and incrementally increasing as the private economy expands - no. But in a time like right now. it would be devastating, and has proven so.

Now, if you wanted to move the capital intensive spending from the military to labor intensive spe ...[text shortened]... tructure, medicine, etc., that might help the economy certainly. At least until inflation hits.

What makes the military more capital intensive than politically correct investing like Solyndra?

Originally posted by normbenign
There is a whole world history that the DailyKos ignores. The great depression may not have been as great if not for the efforts of both Hoover and Roosevelt to spend and regulate us out of it.

Ecoonomists of the era including liberal John Kenneth Galbraith called the Rederal Reserves response "shockingly incompetent". Both Hoover and FDR tried to ke ...[text shortened]... They are motivated not by what will eventually work, but by what the voters see immediately.

That's false. The spending was actually pulling us out of the depression, and then in 1937 he caved to conservative pressure to cut spending to decrease the debt. The country slid right back into the depression and didn't reach its early 1937 level of expansion again until 1940.

The crash of 1987 didn't lead to a depression because of an effective FDIC to prevent runs on banks.

Originally posted by normbenign
What makes the military more capital intensive than politically correct investing like Solyndra?

Nothing. High tech investment is capital intensive, with the caveat that it might have led to more production of goods to be bought and sold rather than sit in military bases and so the multiplier is a bit greater. But the most labor intensive spending would be in health care, education, and infrastructure. It's also inflationary, but that's not a problem right now.

Reagan spent his way out of the 81 double-dip recession, abandoning supply-side economics immediately after it caused the second recession. He kept inflation in check because it was all military spending, which was more capital intensive - as is the space program. Of course, it led to the creation of a permanent underclass, but he didn't need their votes anyway.

Originally posted by Kunsoo
Nothing. High tech investment is capital intensive, with the caveat that it might have led to more production of goods to be bought and sold rather than sit in military bases and so the multiplier is a bit greater. But the most labor intensive spending would be in health care, education, and infrastructure. It's also inflationary, but that's not a problem ...[text shortened]... rse, it led to the creation of a permanent underclass, but he didn't need their votes anyway.

The number of unsupported assertions here is staggering. Don't get me wrong. I think there is a lot of room for downsizing the military, and slowing down weapons procurement, which is probably the most capital intensive.

On the other hand, spending in areas such as health care, educatiion, and infrastructure need to be carefully examined as they are most prone to fraud and waste.

I can see nothing productive since the federal government has been in education. The infrastructure, primarily roads and bridges are really state responsibilities. Health care is going to SCOTUS, but regardless of their decision, I can't help but think that it would be better handled at a more local level.

Originally posted by Kunsoo
That's false. The spending was actually pulling us out of the depression, and then in 1937 he caved to conservative pressure to cut spending to decrease the debt. The country slid right back into the depression and didn't reach its early 1937 level of expansion again until 1940.

The crash of 1987 didn't lead to a depression because of an effective FDIC to prevent runs on banks.

It is liberal dogma that spending ended the great depression. The majority of economists at the time and looking back believed that spending and tariffs were like throwing gas on a fire.

Originally posted by normbenign
It is liberal dogma that spending ended the great depression. The majority of economists at the time and looking back believed that spending and tariffs were like throwing gas on a fire.

Your religious faith in laissez faire is impressive, but like most religious fanatics you are deluded.

Only the most ludicrously dogmatic economists like Friedman could possibly deny that it was government spending in the form of the vast expansion in federal spending necessary for the war that finally ended the Great Depression. Maybe we should have let free markets allocate how many tanks and airplanes were necessary to defeat the Nazis and the Japanese.

Originally posted by normbenign
The number of unsupported assertions here is staggering. Don't get me wrong. I think there is a lot of room for downsizing the military, and slowing down weapons procurement, which is probably the most capital intensive.

On the other hand, spending in areas such as health care, educatiion, and infrastructure need to be carefully examined as they are ...[text shortened]... their decision, I can't help but think that it would be better handled at a more local level.

If road building had been left exclusively to the States, we'd have no interstate highway system and economic activity would be severely negatively impacted. Fortunately, laissez faire loons like yourself weren't in charge at the time. Presumably you would have bitterly fought against the government use of eminent domain to build an intercontinental railroad as well; it's rather staggering how your quaint Bastiatian ideas would have screwed up economic progress in the US.

Originally posted by normbenign
The number of unsupported assertions here is staggering. Don't get me wrong. I think there is a lot of room for downsizing the military, and slowing down weapons procurement, which is probably the most capital intensive.

On the other hand, spending in areas such as health care, educatiion, and infrastructure need to be carefully examined as they are ...[text shortened]... their decision, I can't help but think that it would be better handled at a more local level.

I disagree with much of that, but it's beside the point. The question is whether the spending is stimulative in terms of job creation. Whether it's "fraud" has nothing to do with the economic effect, unless someone is pocketing the money and stuffing it into his mattress.