The US Presidential debate tonight will doubtless spend much breath on Republican and Democrat plans and promises to “create jobs”. The truth (explained in this clip) will most likely be overlooked.
“Professor Antony Davies provides evidence, via empirical data from 1955, that there is no connection between federal spending and economic improvement -it merely adds to government debt.”
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Another expert. I’m getting tired of the debate. Yes the way stimulus implemented wasn’t constructive. Money was given to banks who caused the problem by giving mortgages to people who shouldn’t have qualified. My solution would have been to let bad banks fail(hooray for capitalism). Finance major infostructure projects (projects that will have to be done) across America thereby providing jobs etc.. With the recession you have a great value play. Interest rates as low as they can get, and serious competition for jobs(lower wages). GDP remains higher then it is, plus the money changes hands many times before the wealthy get it. Lower taxes for the wealthy doesn’t help the economy(doesn’t change hands). Only demand will pull the economy back to life. Money given to banks who now know too qualify clients are hesitant to lend. My solution would expire when the jobless rate was low enough. Sadly”my solution” will be labeled socialism and rejected. Austerity is not the solution. John Maynard Keynes would not have stimulated our economy in the years prior to 2008 as was done. His theory shouldn’t be judged on half a business cycle.
How boring. I knew there was a reason I quit after getting my bachelors degree!
Austrian school of economics anyone? Hello people, depressions such as the “Great Depression” and the current mess are the creations of government.
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He’s probably right but I was not convinced by his “graph” that his analysis was correct.
IF it is true that wealthy people just sit on their wealth during bad times because they are scared, then perhaps they are not creating many jobs. So, if you put higher taxes on the wealthy, and used the money to pay for lower paying infrastructure jobs, perhaps more people would have jobs. I’m just guessing – don’t really know.
I do know for a fact that the recent stimulus did result in some people having jobs who would otherwise not have had one; or who would have lost the one they had when the crash happened in ’08/09. If the money used to pay those wages was merely printed out of thin air, (as opposed to getting it from taxes) perhaps it resulted in more peoplel having jobs. Again, I’m just guessing.
He is presenting all government spending and calling it stimulus.
There are benefits that Government provides that are not in GDP – for example, a legal system that protects property rights.
Finally, like all Austrian economists, he does not consider the effects of private debt on GDP. Here’s just one article on private debt: http://seekingalpha.com/instablog/428250-michael-clark/591021-it-s-private-debt-not-public-debt-that-got-us-into-this-mess
Private debt saturation is the problem both now and in the Great Depression. Until this clears, by repayment or default, the economy will not improve regardless of how much public debt increases.