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Originally Posted by $5 submissions
"It fails because you don?t increase economic output by taking a dollar from one person and giving to another.
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That's not what the stimulus is though.
Stimulus is by definition deficit spending designed to re-start the supply/demand cycle by creating demand in the marketplace.
In this case government is the spender (demand) of last resort. (
Keynesian economics)
If you try to balance the budget at the same time you're doing stimulus, then it defeats the purpose. This is why it failed for Japan in the nineties. They had stimulus spending, but cut spending in other areas to fund it. So what happened there is what you're referring to above, shifting money from one place to another.
Same thing happened here in the late thirties. FDR listened to the wrong people and cut spending back to balance the budget, and the unemployment rate shot up again.
Quote:
Originally Posted by $5 submissions
What do you think of the inflationary consequences of the debt accumulation?
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In the long run it's bad. In the short run, adding 10% to our debt total to get the economy moving again isn't a bad tradeoff.
At some point the debt, along with unfunded future liabilities, need to be dealt with, but those aren't the pressing concern right now.
It's the equivalent of a guy in the emergency room losing blood, having a heart attack, and a broken leg all at the same time.
If you worry about fixing the leg first, or restarting the heart first, the patient dies from blood loss.