[QUOTE="aliasfreak"]
[QUOTE="-Sun_Tzu-"] It wasn't perfect, but it did help a lot. It's not a coincidence that as the stimulus has gotten phased out the economy has gotten worse.-Sun_Tzu-
But isn't that the problem with stimulus? It artificially and temporarily props things up. You spend all of this money on hiring people, but then when the government money runs out, they are right back to where they started only now the country is in even more debt, we have increased the amount of money out there (which can't help but devalue the dollar), and there is less government money to go to important things because it is being used to service the debt.
I am by no means an economist, so please give me details on how I am wrong on this.
The problem isn't with stimulus per se, the problem is that the private sector is in so much debt that it is going to take years for people's balance sheets to recover, barring some sort of debt relief for households. But stimulus is valuable because it helps to bridge the huge gap in demand while the private sector is deleveraging. The government is not going to create jobs by cutting jobs. That only makes things worse.
First off, I can see what you are saying and most of it makes sense. However, I'm saying that the problem isn't that the stimulus didn't help, I'm saying the problem is that it is only temporary but with lasting down sides. You seem to agree with this (well, at least the first part, not sure how you feel about the second part). For how long will you (the universal you, not you specifically) try to prop up the economy while the private sector deleverages? If it takes a long time, at what cost does this prop take? Look at countries like Greece that have huge debt to GDP ratios (pretty sure that their debt is due to other things, but the ratio problem still compares). Now they are forced into austerity measures that the public is rebelling against. The whole situation is a mess. So how much do you spend, how much do you go into debt in order to try to bridge the gap? Thanks to Republicans AND Democrats, our debt is so large that it seems that continued deficit spending will bring us to that Greece point.
And why can't the government create jobs by cutting jobs? If you cut jobs, you can cut taxes (for everyone). Deleveraging of the private sector will happen faster because they have more money available to them, people have more money to spend (even Obama admits this since he is for tax cuts for the middle class), and spending should hopefully be increased by the private sector, thereby increasing the demand for jobs. (I've not been feeling well, so hopefully this is at least somewhat coherent :) ). I know it isa gamble to do this, but isn't stimulus also a gamble for the reasons outlined above? Personally, I would rather put my faith in the people to get us out of this than the government, regardless of who is in power.
Just some thoughts of mine. I know that it is over simplified, that much more goes into all of this than what was outlined above, I'm just looking at this from a theoretical standpoint.
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