Recession: Spend or Cut your way out of it?

mattwilson · #1 by **mattwilson** » Nov 18, 2011 10:03 am

You spend money, you create jobs, you create demand, you create goods... jobs create taxes, goods sales create taxes, you reduce the welfare bill.

You cut money, you lose jobs, you lose demand, you lose income taxes, you lose sales taxes, you increase the welfare bill.

When you put it that simply, it seems so clear that the former wins hands down doesn't it. Look for example at some of the major factors that increased growth during the latter years of the great depression, road building projects, government funding of naval construction, and then... finally war production gearing up to the second world war.

It's clear what my thoughts on recession economic tactics would be, I'd like to hear your thoughts... if you will humour me :thumbup:

chairman bill · #2 by **chairman bill** » Nov 18, 2011 10:10 am

Hugin will be along shortly, to tell you that you're economically illiterate, or something.

What you propose is a view that fits with Labour Party thinking on this topic, and indeed Labour government action that was delivering growth & reducing the deficit & borrowing. It's a view that fits with much that the current Business Secretary (whose name escapes us both it seems) has said, and which, were he Chancellor, would no doubt be the sort of policy he'd enact. But that would reduce the opportunity to hammer those on the margins of society, the poor, the dispossesed, the disabled, the non-Tory voters, and would reduce the opportunity to let the rich get richer & stuff.

Ihavenofingerprints · #3 by **Ihavenofingerprints** » Nov 18, 2011 10:22 am

I think the only real disagreement is how much spending is too much. Obviously they can't borrow trillions to stimulate the economy, because they can't pay it back. At the same time, spending a conservative amount might be considered a wasted opportunity.

The Australian government promised they would go back into budget surplus by 2013, and they still plan to (only just). The problem is that plenty of experts think we should hold off that surplus for another few years. Political interests are conflicting with economic interests.

It is an interesting topic.

Pebble · #4 by **Pebble** » Nov 18, 2011 10:59 am

The real question is what to do with the money you create. The £ has been devalued I believe by 25% with current QE policy - we pay for that, yet the money has been handed to the banks - how does this help the economy. To my simple mind what has been acheived is a massive increase in debt (not on the Govt balance sheet, but increasing our costs) with no stimulus to the economy.

GT2211 · #5 by **GT2211** » Nov 19, 2011 8:44 pm

It depends on the cause of the recession and the specifics of the country involved.

The problems and solutions the US faces now is not similar to that of the Volker/Reagan 80's.

wayseer · #6 by **wayseer** » Nov 19, 2011 9:36 pm

Western economics is built on the idea of demand. The government gives us money to spend thereby sustaining demand. Jobs are only a consequence of demand. No demand - no jobs. But no jobs also means no tax so the government cranks up the printing presses to gives us yet more money to spend on stuff we really don't need or want all the time ranking up increasing debt and drying up reserves so that essential business cannot access any finance at affordable rates.

Wow!

So, instead of 'occupying Wall Street' all 'we' have to do is cut up our credit cards then - wang - no economy. The worst thing the governments want us to to do is save.