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Author Topic: Strawman Thread  (Read 20417 times)
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realisticidealist
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« on: December 12, 2009, 06:19:45 PM »
« edited: December 12, 2009, 06:22:20 PM by realisticidealist »

Not a strawman. Try again.

Also, make sure to post the many strawmen you and Lief have posted over the years. I'm sure that'd keep you busy.

Why don't you entertain us with a couple? Since you say there are so many, they should be easy to find!

You actually posted one before I allegedly posted one. I don't support economic policies that 'cause worse downturns'

Try something that's not actually true.

None of what you or Lief the Hack have said about government intervention has been true. Ever.

Do you know anything about even rudimentary economic theory? A nation's real gross domestic product is a function of the equilibrium between that country's short term aggregate supply (up-sloping) and aggregate demand curves (down-sloping); this equilibrium determines the price level and the economic output of the nation. Aggregate demand is equal to the sum of consumption spending, investment spending, government spending, and net export revenue. Recessions can be caused in two major ways, by aggregate demand dropping, resulting in a loss in GDP and little, if any, inflation, or by a decline in aggregate supply, which causes the GDP to decrease in addition to the price level rising; this is also known as stagflation.

In most economic recessions, including this one, the culprit has been the former. Consumption spending by the public has declined, resulting in a decline in aggregate demand. Expansionary fiscal policy works by increasing government spending and/or lowering tax rates, which increasing the aggregate demand by increasing the amount of money available for consumption spending and therefore increasing the equilibrium gross domestic product. The newly available money goes to people who then spend a percentage according to their marginal propensity to consume. This new consumption goes to businesses who, in a climate like this with large amounts of idle capital and therefore has less incentive to invest, are able to hire more people and pay them. These people then spend and so on. This is called the multiplier effect.

Government spending has a larger multiplier effect than tax decreases because tax decreases are more likely to encourage saving over spending unlike government spending. Due to this, balanced budget surplueses can occur, but it also means that government spending is more effective at getting an economy out of a recession than cutting tax rates.

It can easily be argued whether or not the spending has been allocated correctly, or if enough has been spent, or the long term deficit issues, or any number of other issues, but to say that government spending could actually hurt a non-cost-push inflated economy is absurd.

And there is a reason why this is rudimentary economic theory: it has been tried and come through many times. World War II's investment and employment spending is probably the most commonly cited example, but there are many, many more.
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