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Politics : Liberalism: Do You Agree We've Had Enough of It? -- Ignore unavailable to you. Want to Upgrade?

To: Kenneth E. Phillipps who wrote (58201)	1/29/2009 3:17:30 PM
From: DizzyG	3 Recommendations Respond to of 224759

Why Government Spending Does Not Stimulate Economic Growth November 12, 2008 by Brian M. Riedl Backgrounder #2208 In a throwback to the 1930s and 1970s, Democratic lawmakers are betting that America's economic ills can be cured by an extraordinary expansion of government. This tired approach has already failed repeatedly in the past year, in which Congress and the President: 1. Increased total federal spending by 11 percent to nearly $3 trillion; 2. Enacted $333 billion in "emergency" spending; 3. Enacted $105 billion in tax rebates; and 4. Pushed the budget deficit to $455 billion in the name of "stimulus." Every one of these policies failed to increase economic growth. Now, in addition to passing a $700 billion financial sector rescue package, lawmakers have decided to double down on these failed spending policies by proposing a $300 billion economic stimulus bill. Even though the last $455 billion in Keynesian deficit spending failed to help the economy, lawmakers seem to have convinced themselves that the next $300 billion will succeed. This is not the first time government expansions have failed to produce economic growth. Massive spending hikes in the 1930s, 1960s, and 1970s all failed to increase economic growth rates. Yet in the 1980s and 1990s—when the federal government shrank by one-fifth as a percentage of gross domestic product (GDP)—the U.S. economy enjoyed its greatest expansion to date. .... Most government spending has historically reduced productivity and long-term economic growth due to: [3] 1. Taxes. Most government spending is financed by taxes, and high tax rates reduce incentives to work, save, and invest—resulting in a less motivated workforce as well as less business investment in new capital and technology. Few government expenditures raise productivity enough to offset the productivity lost due to taxes; 2. Incentives. Social spending often reduces incentives for productivity by subsidizing leisure and unemployment. Combined with taxes, it is clear that taxing Peter to subsidize Paul reduces both of their incentives to be productive, since productivity no longer determines one's income; 3. Displacement. Every dollar spent by politicians means one dollar less to be allocated based on market forces within the more productive private sector. For example, rather than allowing the market to allocate investments, politicians seize that money and earmark it for favored organizations with little regard for improvements to economic efficiency; and 4. Inefficiencies. Government provision of housing, education, and postal operations are often much less efficient than the private sector. Government also distorts existing health care and education markets by promoting third-party payers, resulting in over-consumption and insensitivity to prices and outcomes. Another example of inefficiency is when politicians earmark highway money for wasteful pork projects rather than expanding highway capacity where it is most needed. Mountains of academic studies show how government expansions reduce economic growth:[4] 1. Public Finance Review reported that "higher total government expenditure, no matter how financed, is associated with a lower growth rate of real per capita gross state product."[5] 2. The Quarterly Journal of Economics reported that "the ratio of real government consumption expenditure to real GDP had a negative association with growth and investment," and "growth is inversely related to the share of government consumption in GDP, but insignificantly related to the share of public investment."[6] 3. A Journal of Macroeconomics study discovered that "the coefficient of the additive terms of the government-size variable indicates that a 1% increase in government size decreases the rate of economic growth by 0.143%."[7] 4. Public Choice reported that "a one percent increase in government spending as a percent of GDP (from, say, 30 to 31%) would raise the unemployment rate by approximately .36 of one percent (from, say, 8 to 8.36 percent)."[8] heritage.org

To: Kenneth E. Phillipps who wrote (58201)	1/29/2009 5:18:58 PM
From: MJ	7 Recommendations Read Replies (2) \| Respond to of 224759

Kenneth Is it any wonder that this is the solution that Obama has come up with? That's what he admits to growing up with----food stamps. In a state where vegetables grow the whole year, the ocean is full of wonderful delicious fish---coconuts fall from palm trees to be retrieved for bending over--------Obama was on food stamps. I've always wondered how he could not afford food but could afford to use drugs. How did he support his drug habit? How many trillions is that debt that Obama and the Dems have created? mj