tag:blogger.com,1999:blog-8529580665294663953.post691724532851522975..comments2023-10-27T04:26:57.609-07:00Comments on InvestorCentric: Why More Stimulus Spending Is A Flawed ArgumentNuWire Investorhttp://www.blogger.com/profile/02512928198926080436noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-8529580665294663953.post-72074734669422306102009-11-05T08:12:32.361-08:002009-11-05T08:12:32.361-08:00(1) Short-run stimulus spending such as "cash...(1) Short-run stimulus spending such as "cash for clunkers" which puts otherwise idle resources to work, does not equate "bigger government".<br /><br />(2) If you really consider this an financial/economics blog, then you know very well that employment is a lagging indicator and not a measure of the success of the stimulus. You complain about State and Federal revenues falling -no kidding, its a recession. However, imagine all the police, fire dept personnel, teachers and other state employees who would no longer be employed if not for Federal stimulus money. <br /><br />3) You argue that the growth in GDP was anemic - but that plays exactly into what Krugman has been saying all along. He predicted anemic GDP growth long ago, and has even expressed concern over a double-dip recession because of folks like you who back off and obsess about the deficit (despite record low rates on gov debt) - you are a part of making 2010, 1936 all over again.<br /><br />4) Krugman isn't claiming that government is the best at allocating capital in all circumstances. He's saying that in cases of severe recession, with the Fed hard up against the zero bound (traditional forumulas all estimate the Fed should set the rate at around -5%! ... of course, that isn't possible). Government intervention was not the villain in either Japan's lost decade nor the Great Depression. In fact, they are very disparate examples where problems were exacerbated by schizophrenic policy. The Great Depression in particular, was a failure of the Federal Reserve to respond to monetary contraction. The WPA and other programs that put people to work was prudent policy as the economy had acheived equilibrium at low economic output and high unemployment. In fact, such spending should have been even greater and without Roosevelt' attempts to balance the budget. Make no mistake, only the MASSIVE government stimulus in the form of World War II spending brought the US out of the Great Recession. You attack the WPA and similar efforts without acknowledging the FACT that without government intervention those resources would have been entirely IDLE. Government programs don't always have to be more efficient than those of the private sector - in particular, when the private sector is failing to mobilize available resources. THAT is the purpose of government stimulus. Get something out of otherwise idle resources, prop up aggregate demand by putting money in people's hands. Gradually, the private sector rises to meet the demand and the government support is no longer necessary.<br /><br />You really fail to make a good case against stimulus.Bradnoreply@blogger.com