Wednesday, January 28, 2009

Okay, prepare to be stimulated

It has passed. The stimulus package is days away from being signed into law to great fanfare. I get email from you out there that support Obama and I also get email from Republicans that think government has to "do something."

Please enlighten me. This is not a trap, but deserves an honest answer to this question. Here it is:

Where is this money coming from?

My follow-up question would be:

Knowing now where it has come from, can you tell me exactly how it will save the economy?

Feel free to pass this along to any Keynesian out there that wants to explain it. This subject deserves a chance to be discussed here.

7 comments:

berburbaby said...

Where: Pot of Gold at the end of the rainbow.

How: Magic.

However, there is a caveat. We all must say over and over "I do believe in fairies, I do believe in fairies" for this to work. Otherwise, the magic dies and only a semblance can be found at Disneyland.

Which, if everyone in America went to Disneyplace West or Disneyplace East for one week each year, I'm sure that would stimulate the economy as much as the magical money Congress pulled out of its woohoo.

As a matter of fact, a coworker just returned from an almost two week stay, and he seems as stimulated as the economy would be.

Gino said...

its only passed one house so far.
and the bill that passes the senate is expected to be very different.
we'll talk then, when we actually have a document to discuss.

Ronald said...

Gino, your optimism is inspiring.

It'll go to conference between the houses and come out far more outlandish and then be signed by the President. But I'll play along.

We'll discuss it when it's in front of the president.

robert the grump said...

Tracy, it's clear that you're one of those confused Friedman followers. Or maybe you listen to the Cato Institute too much.

I am not a Keynesian, but I'm going to take a crack at this anyway. In fact, my econonic theory is less like John Maynard Keynes and more like Maynard G. Krebs, but I understand Keynes, somewhat. I'll type very slowly so you can follow me, Tracy.

I'll bet you that all of your blog readers believe this emphatically: The New Deal did not end the depression, WWII did that. I know that you believe it, Tracy, we've had that discussion.

Well you just agreed with John Maynard Keynes on that one. Keynes once wrote a blistering letter to FDR because he felt FDR was spending far too little money to make his theory work. To Keynes, the New Deal was ridiculously underfunded.

And what was WWII? Why did that end the depression? It was massive government spending on a scale magnitudes higher than the New Deal, which is exactly what Keynes was preaching.

So you just agreed that Keynes was right and Keynesian economics worked.

To wit; Keynes believed that massive spending (raised by taxes and borrowing among other things) would stimulate the economy and WWII is a prime example that it works. Sure, we're still paying off the debt from WWII, but you can't say that the depression wasn't over, and a good economy gives you money to pay off the debt.

Since the good old days, Keynesians have been in the minority. Milton Friedman's accolytes brought us Monetarism, which has been the reigning theory for decades now. You can see how well that's worked recently.

For the unwashed, Montarism is the theory that economic highs and lows (depressions) can be controlled by the Fed, through raising and lowering the interest rate.

Bzzzzzt! Wrong answer. That went out the window a couple of months ago. The rate is effectively zero and it isn't working.

At least Keynesians can point to the massive spending of WWII and claim that investing in manufacturing and infrastructure brought us jobs and prosperity. They have history on their side.

So maybe Obama signs the New New Deal, maybe the Rushpublicans stop him. But look at the stimulus package and you'll see that Obama is not FDR, dipping his little toe into Keynesian economics. Nope, Obama is jumping in with both feet.

We'll see how that works out. Just don't bullshit your public by saying Friedman was right, and for the love of God, give us a better alternative, Mr Cynic.

Gino said...

so, you agree also that bush's war MUST be a positive thing,right.
good for the economy and all that.

hey, whats a few dead bodies if it keep them off the unemployment rolls,right?

Tracy said...

WW2 - massive government spending...right...it solved unemployment too...how? SENDING EVERYONE OFF TO WAR!

FDR did underspend in Keynes estimation but FDR's roadblock has been solved already thanks to Nixon. Roosevelt did not operate in a 100% fiat currency monetary system...he tried to fix that by confiscating the country's gold. Nice.

The New Deal prolonged the depression. It did the oppositve of supply-side economics (another disaster) by fixing prices. People went hungry while farmers were paid to plow crops. Protectionist trade policies were put in place to keep jobs. The depression extended into the war and some argued continued just beyond it. Some solution.

The alternative is what progressives can't deal with because it requires non-intervention. It requires the liquidation of bad debt. Pure and simple. You want it bought by fake money and artifically given value by bureaucrats and I want poor people to finally be able to afford things. What do you progressives have against poor people that you're afraid they'll get ahead without YOUR help?

Friedman wasn't 100% right, but Rothbard was...and is.

robert the grump said...

Gino, Bush's war is certainly stimulating the economy...of Iraq. I see no simularity between WWII and Iraq. I see nothing in Obama's actions that mirror Bush's, thank goodness.

Like I said, I'm not a true Keynesian. All I'm saying is that massive government spending worked once, if not in the way it was planned.

Why do you and Tracy think that massive government spending is limited to war? Are you are couple of war mongers? Is your imagination that limmited?

I don't see anything about WMD or war in general in Obama's spending package. I see investment in infrastructure and alternative energy, which is this nation's future. And there's some pork that should be trimmed, of course.

I also don't see any of Tracy's protectionism in the spending package, though at least a few Senators on both sides seem to be aiming to add some.

What Obama is trying to do is what FDR failed to do. Keynes has neither been proved or disproved in my opinion, but we'll soon know, won't we?