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  • Not every economist agrees that stimulus is a good thing
  • Government spending does not increase spending, it just takes spending away from the private sector

Keynesians and stimulus

One of the Keynesian economic ideas is that the Government has to balance the economic cycle. When private sector spending falls, the government needs to spend in order to counter the cycle. If you think of the economical cycle as a necessary way of cleaning out bad business, then the government should of course not interfere.
But if the government does interfere and there can be problems.

  • Temporary Government projects like unemployment between jobs become permanent (a source of incomes). The problem is once those jobs are created,it politically impossible to remove them when the economy recovers.
  • Most governments do not run surpluses. This means any economic stimulus must feed government debt. Governments in this case stimulate the deficit as much as the economy.
  • Governments when they wish to stimulate can either invest or spend the money. Sadly most politicians do not see the difference and money is squandered, leaving only debt to be repaid by future generations.
  • The increase in speding may be offset by monetary policy
  • How will consumers and investors react to the expectation of higher taxes in future.
  • What if the estimate of growth does not come true, or growth does not come back.
  • Stimulus is not always spent on the most economically effective projests, but sometimes for political reasons on particular areas.

Peter Schiff on Stimulus

Peter Schiff on Stimulus

  • Vultures, no-one likes them but we need them. the same is true in a recession. Here is an example of when something is unpopular but we shouldn't go without it.
  • There can be inflation when prices are falling, just the other factors are hiding the inflation.

Stimulus to create jobs

Everyone in the soviet union had a job, they all worked for government, but they were all flat broke.
Jobs should not be the focus. Productive jobs are.