This is not a question that I am asking because I am not convinced that fiscal stimulus is negative. I’m asking this question because I’d like to know why it is that people here oppose it because I’m tired of seeing varous “free market” Fox news types oppose government stimulus based upon the most pathetic reasons.
I’m asking strictly on economic grounds, if you think that it will put the economy back on track but that an increase in government spending is morally aggregious then simply reply that you do think that the stimulus will work to bring back the economy to full health.
At any rate, when overall demand in the economy is significantly below what it has been, businesses aren’t willing to spend because there’s not enough demand and so there’s no demand for loans, and consumers aren’t spending becuase they’re afraid that they’ll lose their jobs, why is it that an increase in government spending which allows people to be employed once again, will not jumpstart the economy and reach full employment once more?
Please do not use anything from other people’s posts, I want to know why you, before reading this post, didn’t think that fiscal stimulus would be economically effective.
I don’t quite see how the first clause of that sentence has anything to do with the rest of them, but in any case I’m afraid you won’t get any answers if the condition is that one must not use anything from anyone else’s writings…as the economic reasons for being against government stimulus were developed before anyone in this forum was born, and I seriously doubt anyone here came up with them on their own, independent of any exposure to the work of Austrian economists who came before them.
Not writings, posts. I’m saying that if poster A has reason X for opposing stimulus then I don’t want Y or Z to be included because they can be found by looking on the page. I don’t care if Hayek’s, Rothbard’s, Mises’, Friedman’s or anyone else’s criticisms of fiscal stimulus are used to long as those are the reasons why you opposed it before coming here, rather than having a vague idea of why, or no real idea other than “it’s government so it’s probably bad”, which is not an entirely negative assumption, and having to scramble through posts on the page or come up with an ex post facto justification for the belief that was already held. I would like to know why people right now oppose stimulus, I don’t care if someone has convinced them in the past, and so feel free to site anyone so long as they can state your pre existing reasons more eloquently than you can.
Yeah, I guess. But it still kind of sounds like you’re asking for people to have their own justification for the opinion…as opposed to simply being convinced by reasoning that has been presented to them in the past. I realize you basically said you didn’t have a problem with citing someone else, but you still threw in “so long as they can state your pre existing reasons more eloquently than you can”…still implying that one who responds to your request here must have held the reasoning before the cited person’s argument was presented to them.
Is this the case? If not, why all the explanation of restrictions? Why not just ask “what reasoning do you have for the conclusion you hold, and how did you formulate that reasoning/where did it come from?”
Is that a more accurate articulation of what you’re wanting to know?
I think what he wants is for you to rearticulate these arguments in your own words, rather than just linking to a bunch of Mises.org daily articles/books.
He wants to know that you’ve really thought about the issue instead of just regurgitating–like he said–‘government is bad, so stimulus is bad’ arguments.
At least I think that’s what he’s trying to get at.
That is certainly a short way of putting it. As I think you know brevity has never been my strong point. However, an important qualification is simply that you didn’t run and get the information after reading this. As much as possible I would like to know why you believe it now instead of just coming up with an explanation after being asked for one or by reading someone else’s posts on this page because then that’s not why you believed it now is it? You wanted to believe it and now you’re simply justifying it. There’s also the qualification that I would like it on economic, not ethical grounds
Anyway, JJ, why don’t you think stimulus will work?
@Schnapps
I don’t really care who the information comes from, I want to know why people honestly believe it. If it is because of a bunch of stuff that you read on Mises, sure throw it at me! Just as long as it was already why, not an after-the-fact justification.
Now I’d certainly be encouraged if people could describe these things fully in their own words and had really researched opinions, but I’m not looking for a “real” or even “intelligent” answer right now, I’m looking for the truth of why people believe what they believe.
So… Why are you against stimulus? (assuming you are)
Because it didn’t work when Hamilton started it. The economy got better once Jefferson ended the break-windows-and-replace-them policies enacted by the Federalists under George Washington. The economy quickly rebounded after the panic of 1819 when there was no stimulus. The same thing with the forgotten depression of 1920-21. The fact that we’ve been suffering from stimulus ever since Hoover has pretty much proven it doesn’t work.
Luckily I don’t have that problem, as I (luckily) became aware of the Austrian Business Cycle Theory before I ever really heard any talk of “economic stimulus”.
It won’t work for the very same reasons it has never worked. It won’t work for the very reasons the Austrians have pointed out for decades. I actually went into this in detail (albeit as a response to a different question) here, but the short answer is because “full employment” is not the real end…so a blind attempt to achieve that goal will only distort the market and make the true end of increased wealth and economic prosperity farther off (i.e. not only retard its advancement, but likely regress progress that has been made in the past).
You cannot create wealth from a printing press. The only thing fake money (and the accompanying legal tender laws) will ultimately do is lead to malinvestment and misallocation of resources, which essentially manifests in an artificial boom…inevitably leading to a bust later.
If we look at things in a purely theoretical manner then what would you argue would be the effect of a decrease in general spending? Wouldn’t businesses suddenly be at a loss to obtain sufficient funds to pay their workers? There are good arguments against GDP, but this doesn’t get us past the theoretical difficulties.
Also, in a recession if businesses are afraid to take out loans because there is not sufficient demand for their products then why would government spending crowd out private investment that isn’t happening?
How can empirical evidence determine an economic relationship? Especially when you cannot determine what would have happened in the absence of the stimulus
@JJ
Assuming that the government did not inflate the money supply by one cent, and the only government action was fiscal, meaning the spending was entirely borrowed from the private sector to fund public works, then what is the flaw in the stimulus?
Full employment might not be the goal as such, but it is a means to an end. There will be greater output if more people are employed, and this means in all areas, not just in current goods, but in capital goods industries. If there are resources that are not being utilized then this benefits no one, so wouldn’t it benefit growth both now and in the future to increase demand rather than to have an economy that is eternally far below capacity, not just below capacity with the usual slack that is given in an equlibrium position?
Really. Well why didn’t you say so? Let’s tax 100% of everyone’s wealth (we want to make sure we don’t run out of money) and hire all the unemployed to dig ditches and then fill them in again. That’ll give us 100% employment. I’m sure that will mean a much greater output…right?
“resources not being utilized benefits no one”. That makes absolutely no sense. Go back and read through the thread I linked earlier. We have a limit to the amount of work that can be done at any given time. Even at 100% employment, there will be oil, coal, gold, silver, lithium, iron, copper, and a whole host of other resources that will “not be utilized”. Simply going around saying “this benefits no one” is like saying “living is hazardous to your health.”
But what’s more, even taking your premise at face value, you’re assuming that bureaucrats in Washington know exactly what resources should be used, how, when, and by whom, at any given time. Or even if you’d concede they could not know “exactly”, you’re implying they know better than the market…as in, central planning is viable. Thomas Sowell cites a very damning statistic that debunks this notion in one single step.
In one sentence, “central planning doesn’t work.” What you’re implying is that a little intellectual elite actually knows better about what the people want than the people themselves. This is quite presumptuous to say the least. (I, however would argue it’s either completely insane, or just plain asinine.)
Fiscal stimulus, in all likelihood, won’t be “economically effective” in the sense of removing the issues that led to the economic downturn.
In the days of commodity money, economic downturns - then know as “financial panics” - were attributed to “shortages of money and credit”. These alleged shortages were actually due to fractional-reserve banking, which provided the illusion that there was more real money than there actually was. Production and consumption patterns became increasingly divergent until the failure of one or more business ventures exposed the fractional-reserve banking activities. What was called a “shortage of money and credit” was in fact an over-extension of money and credit beyond the production capability of the economy to satisfy real consumer demand. Furthermore, this fractional-reserve banking was pervasive throughout the economy, which is why the effects of the panics were so far-reaching. The Panic of 1907 is a classic example of such a financial panic.
After the advent of fiat currency and central banking, economic downturns were attributed either to “overproduction” or a “fall in general demand”. These two notions are two sides of the same coin. Producing “too much” of something will make the demand for it appear relatively smaller; “too little” demand for something will make the supply of it appear relatively larger. While centralizing control of money and credit in the hands of the central bank seemed to fix the illusory issue of “shortages of money and credit”, it did not fix the real issue of divergent production and consumption patterns. An economic downturn is the fix for that. Why, then, would a stimulus be needed? It would likely prevent the liquidation of at least some business ventures that had turned out to be unprofitable, thereby helping to set the stage for the next economic downturn (as production and consumption patterns wouldn’t be re-coupled as closely together as they presumably would’ve been otherwise).
How cerebral does one have to get to convey the concept that they do not like to be stolen from? I have X money, if someone steals it or counterfeits it, I will lose the purchasing power it currently affords me, and I will be poorer… I don’t like being poor, so I tend to oppose people who would steal or counterfeit my money.
You can’t make everyone richer by stealing from them. You can only steal from the many to give to a few. If the government can make everyone richer by stealing from them and apportioning part of the spoils to its buddies, then so can I… But apparently no one is that much of an idiot.
Well, Neodoxy, if you break it down, there is no being simple called “the economy.” It is a collection of individuals who perform mutually-beneficial trades to increase their utility through pareto efficient actions.
To “improve the economy” means to improve the state of uneasiness of people. When we tax and spend, we are inherently breaking their utility functions. How can we expect society to be be provably better off if we are attempting the impossible interpersonal utility comparison?
When you accept the Keynesian language of aggregates/averages you inevitably end up asking questions that are all jargon and no meaning. As others have pointed out, “full employment” and “positive GDP growth” are meaningless ends in and of themselves. The reason why a lender is not lending, a business is not borrowing, and a consumer is not spending is because they prefer not to.
It’s not “animal spirits” that cause the preceding lending/borrowing/spending aggregate spree (the boom), and it is not “animal spirits” that cause the inevitable lending/borrowing/spending aggregate drop (bust) that follows. Capital has been grossly misallocated/wasted/consumed – in relation to the expressed time preferences of the economic agents – during the boom. The bust is the inevitable realization of that fact and it is the first and necessary step of the recovery. Stealing wealth from everyone in order to bring about “full employment” (paying people to dig ditches and fill them back up) does not resolve this misallocation.
It’s the boom that eats up capital, that destroys wealth – not the bust. Far from “jumpstarting” anything, causing more capital misallocations via a “stimulus” only postpones the inevitable bust (“Not on my watch!”) and makes it worse.
