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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: Doughboy who wrote (40003)	9/27/2000 2:45:26 AM
From: Neocon	Respond to of 769667

If spending had far outstripped gains in production, as you say, the rate of inflation would be significantly higher, break tapping or not. You can do three things with a surplus: you can rebate it; you can spend it; and you can take it out of circulation while waiting for debt to come due. Two of these things will not significantly affect aggregate demand. A Keynesian stimulus depends on manufacturing a surge in aggregate demand. Therefore, they are not really a stimulus. The third thing, however, does effect aggregate demand, by suddenly decreasing it, and therefore making over production and recession likely. I don't know about tidal waves, but plenty of people will get a break, and most folks, even affluent ones, have plenty of consumer debt. You are quite right. If there is a deflation, one can print more money, and the Fed has levers to enter more money into circulation. But the base effect is not asinine. We cannot force people to retire bonds before they have matured, and we do not want to overpay by paying full value on bonds that have not matured. Therefore, if one dedicated the money to debt reduction, one would be "hiding it under the mattress", taking it out of circulation for a protracted period of time. On the other hand, one would have to put more money into circulation to ease the effect. Why? Wouldn't that be "stimulative"? Just keep the money in circulation in the first place. Bush proposes using a quarter of the on- budget surplus for tax reduction. Some of the rest will go to spending, and some will go to debt reduction. The numbers used seem solid, but are amendable at any point, so what is the problem?