# Is it possible to improve the economy without increasing government spending? **URL:** \ **Category:** Great Debates\ **Created:** [January 26, 2010, 5:23am UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481 "2010-01-26T05:23:18Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [January 26, 2010, 9:12pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/21 "2010-01-26T21:12:24Z")
Finally, if government spending was the road to higher economic performance, could you explain what happened to Britain in the last decade? Britain’s government spending has increased from 37% of GDP to about 54% of GDP in the last ten years. Perhaps the fastest rate of growth of government in the OECD. Britain’s economy is a basket case. What does that say about the economic value of bigger government? And much of that was financed with borrowing, with Britain now having a public debt approaching WWII levels. With that level of stimulus, why is Britain’s economy such a mess if your side’s theories are correct? Britain is underperforming almost all of its European neighbors. ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [January 26, 2010, 9:17pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/22 "2010-01-26T21:17:31Z")
> [@Sam Stone](#): > > Have you looked at what happened to Japan? It is eerily similar to what has happened to the United States, including the mechanism of its rise and fall - a real estate boom/bust. When Japan’s real estate prices went through the roof, the Japanese used the paper wealth to over-leverage themselves. They consumed like crazy, they invested their cash around the world. […] > > After Japan’s meltdown, it tried to stimulate its way out. It failed miserably. This Feb. 2009 [Wall Street Journal article](http://online.wsj.com/article/SB123360930255440715.html) has an interesting and more nuanced analysis of the “Japan analogy” talking point than **Sam Stone** ’s predictable “if the Democrats are doing it, it’s wrong” reaction: > [@](#): > > So, is the U.S. about to repeat that unhappy Japanese experience? There certainly are similarities between Japan then and the U.S. now. But there also are some key differences. Most important, the stimulus package being shaped now has a different mix of spending than the ones the Japanese tried, and it has a chance of hitting the economy faster. […] > > Alongside the unsettling parallels between then and now, there are important differences. The biggest one, as Rep. Ryan notes, is that Japan made a fundamental mistake in monetary policy, which the U.S. Federal Reserve decidedly isn’t repeating. At the outset of Japan’s woes, it instituted a tight monetary policy. The Fed is doing the opposite. > > In addition, C. Fred Bergsten, a former Treasury official and longtime student of international economics, cites a significant difference between the makeup of stimulus spending the Obama administration is pushing and the version used in Japan. “Virtually the totality of the Japanese programs was what we call roads and bridges,” he says. “The phrase ‘roads to nowhere’ came from that.” > > The U.S. stimulus package, by contrast, has a considerably more varied makeup; about half is tax cuts and spending on programs such as unemployment insurance, worker retraining and Medicaid benefits to the states, which most analysts on both sides agree largely get injected into the economy quickly. Of the remaining spending, Mr. Bergsten notes, only some is of the traditional roads-and-bridges variety. “So the composition is very different,” he says. > > In addition, economist Barry Eichengreen of the University of California, Berkeley, says that one problem with Japan’s stimulus spending was that it was slow and halting. “My reading of Japan’s experience is that fiscal stimulus didn’t work because it was delayed, sporadic, undersized and inadequately front-loaded,” he argues. > > The other big lesson from Japan, says Mr. Eichengreen, is that “fiscal stimulus alone won’t bring a deep recession caused by a banking crisis to an end. You need to fix the banking problem and get financial markets going again at the same time you replace some of the private spending that has evaporated with public spending.” ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [January 26, 2010, 9:26pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/23 "2010-01-26T21:26:57Z")
The problem with the Keynesians is that they get so focused on the mechanisms of money and the attempts to tinker with the distribution of money to move the economy that they lose sight of what an economy actually is. They could learn a little from the Austrians in this regard. The Austrians have always understood that at its core, the economy is about real people making things other people want or need. It’s about information transfer between producers and consumers, about connecting buyers and sellers together, and about efficient management of production and resources. Yes, the money supply can break down and break the economy. That nearly happened in the financial crisis last year. But in the end, the fastest way to economic growth is to create conditions which restore the ability of people to cooperate with each other and make things the other person wants and needs. When Washington rains money down on the economy, it does damage. It may cause a short-term stimulus (no one really denies that shoveling wheelbarrows of money out a helicopter door onto the population won’t cause a temporary increase in spending). But it has pernicious side effects. It destroys information. Producers can no longer tell what consumers want in the long run, because that information is masked by short-term stimulus. Resources are diverted away from efficient used and applied to inefficient uses dictated by politicians. Jobs that are no longer cost-effective are maintained, tying up resources that could be going to more efficient work. Companies that should fail and clear the way for new companies instead stick around and soak up the economic oxygen in the room. In the end, you trade off a sharper, shorter recession which has the effect of clearing away a lot of dead wood in the economy for a gentler, longer recession that eventually leaves your economy less productive and less efficient. Any attempt to stimulate the economy has to take these negative secondary effects into account. It needs to be done carefully and intelligently, with an aim to causing the least amount of economic distortion possible. As Larry Summers himself said, an effective stimulus has to be ‘timely, targeted, and TEMPORARY’. Give the economy a little shot in the arm where it needs it most, then get the hell out of the way and let it heal itself. The stimulus as devised by the government is none of those things. It’s not fast - for political reasons, much of the spending was aimed at areas that simply could not spend it quickly. It wasn’t targeted - the stimulus money went more to Democratic constituencies than it did to the areas most in need. And it’s turning out to be not so temporary, either. Much of the stimulus money has gone into swelling the ranks of public servants and building new public buildings like schools - which will either fall into disrepair and disuse, or be a permanent drag on the economy. And of course, Washington is now talking about Stimulus Mk. II, setting up the expectation of a Japanese-style permanent series of stimuluses. Whatever merits the abstract concept of a Keynesian stimulus might have, the Federal Government implemented it in about the worst way possible. Why would you expect them to do better next time? ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [January 26, 2010, 9:27pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/24 "2010-01-26T21:27:09Z")
> [@Sam Stone](#): > > Finally, if government spending was the road to higher economic performance, could you explain what happened to Britain in the last decade? Britain’s government spending has increased from 37% of GDP to about 54% of GDP in the last ten years. Perhaps the fastest rate of growth of government in the OECD. > > Britain’s economy is a basket case. What does that say about the economic value of bigger government? It says, “Here’s **Sam Stone** again with his cite-free, selectively presented Republican talking points”. Please provide cites for the specific assertions you’re making, so we can look at them to understand the context and additional relevant facts that you’ve carefully omitted. ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [January 26, 2010, 9:29pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/25 "2010-01-26T21:29:50Z")
> [@Sam Stone](#): > > In the end, you trade off a sharper, shorter recession which has the effect of clearing away a lot of dead wood in the economy for a gentler, longer recession that eventually leaves your economy less productive and less efficient. Sez you. This is a recitation of a key tenet of faith in the libertarian creed, rather than an empirical truth supported by reliable evidence. You think it’s so because it seems so reasonable and logical to you, but that’s not the same thing as providing evidence that it **is** so. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [January 26, 2010, 9:36pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/26 "2010-01-26T21:36:32Z")
> [@Kimstu](#): > > This Feb. 2009 [Wall Street Journal article](http://online.wsj.com/article/SB123360930255440715.html) has an interesting and more nuanced analysis of the “Japan analogy” talking point than **Sam Stone** ’s predictable “if the Democrats are doing it, it’s wrong” reaction: They said something very close to what I said. I don’t think those ‘key differences’ are that key, with the exception of monetary policy, which I agree with. And I agree that the best part of the stimulus was the rapid increase in temporary benefits and distressed worker support. That’s the part that has really had a good effect - and that’s where the stimulus should have ended. If the U.S. government had done a $400 billion stimulus consisting of instant payments to workers hardest hit and some job retraining and such, the economy would be healthier today, in my opinion. As for the Japanese effort being slow and halting - that’s _exactly_ what the U.S. is doing. A year after the stimulus passed, a lot of it still hasn’t been spent. If Washington does get a Stimulus II package, it won’t pass for close to another year (you won’t see anything large before the midterm elections - guaranteed), and it won’t hit the economy for at least six months after that. This would put us well into 2011 - about three years after the start of the downturn. That’s pretty much the way Japan’s cycle went, too. A stimulus, followed by another downturn, followed by a stimulus, followed by… And now Obama is promising a spending freeze for three years - which I support, but which doesn’t make your case at all. I remember when this whole stimulus debate started, I pointed out that seven years into the New Deal unemployment was just as high as it was in the beginning, and one of the talking points on the left was that a big mistake FDR made was to give up on the stimulus too soon, setting the stage for recession in 1937. So from that perspective, isn’t Obama making the same horrible mistake? ---
**Author:** ![spazattak](https://avatars.discourse-cdn.com/v4/letter/s/8e8cbc/32.png) [@spazattak](https://boards.straightdope.com/u/spazattak)\ **Post date:** [January 26, 2010, 9:38pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/27 "2010-01-26T21:38:47Z")
> [@Sam\_Stone](#): > > The problem with the Keynesians is that they get so focused on the mechanisms of money and the attempts to tinker with the distribution of money to move the economy that they lose sight of what an economy actually is. They could learn a little from the Austrians in this regard. **The Austrians have always understood that at its core, the economy is about real people making things other people want or need. It’s about information transfer between producers and consumers, about connecting buyers and sellers together, and about efficient management of production and resources.** > > Yes, the money supply can break down and break the economy. That nearly happened in the financial crisis last year. But in the end, the fastest way to economic growth is to create conditions which restore the ability of people to cooperate with each other and make things the other person wants and needs. > > When Washington rains money down on the economy, it does damage. It may cause a short-term stimulus (no one really denies that shoveling wheelbarrows of money out a helicopter door onto the population won’t cause a temporary increase in spending). But it has pernicious side effects. It destroys information. Producers can no longer tell what consumers want in the long run, because that information is masked by short-term stimulus. Resources are diverted away from efficient used and applied to inefficient uses dictated by politicians. Jobs that are no longer cost-effective are maintained, tying up resources that could be going to more efficient work. Companies that should fail and clear the way for new companies instead stick around and soak up the economic oxygen in the room. > > In the end, you trade off a sharper, shorter recession which has the effect of clearing away a lot of dead wood in the economy for a gentler, longer recession that eventually leaves your economy less productive and less efficient. > > Any attempt to stimulate the economy has to take these negative secondary effects into account. It needs to be done carefully and intelligently, with an aim to causing the least amount of economic distortion possible. As Larry Summers himself said, an effective stimulus has to be ‘timely, targeted, and TEMPORARY’. Give the economy a little shot in the arm where it needs it most, then get the hell out of the way and let it heal itself. > > The stimulus as devised by the government is none of those things. It’s not fast - for political reasons, much of the spending was aimed at areas that simply could not spend it quickly. It wasn’t targeted - the stimulus money went more to Democratic constituencies than it did to the areas most in need. And it’s turning out to be not so temporary, either. Much of the stimulus money has gone into swelling the ranks of public servants and building new public buildings like schools - which will either fall into disrepair and disuse, or be a permanent drag on the economy. And of course, Washington is now talking about Stimulus Mk. II, setting up the expectation of a Japanese-style permanent series of stimuluses. > > Whatever merits the abstract concept of a Keynesian stimulus might have, the Federal Government implemented it in about the worst way possible. Why would you expect them to do better next time? Leaving aside the ad hominem prior to the bold text, **Sam** makes a fantastic point. Its all about transactions. The government shouldn’t be the one attempting to make the transactions - they should be facilitating them. The classic example of this is infrastructure - increasing people’s mobility and ability to communicate with each other - making transactions easy and predictable. That would tend to correlate to transportation and communications improvements as well as research in these areas. I don’t think the left has previously considered these a priority. Thank you, **Sam** , for pointing us in the right direction. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 26, 2010, 9:44pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/28 "2010-01-26T21:44:42Z")
> [@Kimstu](#): > > Sez you. This is a recitation of a key tenet of faith in the libertarian creed, rather than an empirical truth supported by reliable evidence. > > You think it’s so because it seems so reasonable and logical to you, but that’s not the same thing as providing evidence that it **is** so. The New Yorker had an article a week or two back, inspired by Richard Posner’s conversion to Keynesianism, where many U of Chicago professors were interviewed about their reaction to the Great Recession. Several of the more elder and hidebound ones were in total denial that the market meltdown in any way falsified their beliefs. Sam is in good company, it seems. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [January 26, 2010, 9:45pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/29 "2010-01-26T21:45:19Z")
> [@Kimstu](#): > > It says, “Here’s **Sam Stone** again with his cite-free, selectively presented Republican talking points”. Please provide cites for the specific assertions you’re making, so we can look at them to understand the context and additional relevant facts that you’ve carefully omitted. [UK public spending, 1980-2011](http://www.ukpublicspending.co.uk/downchart_ukgs.php?chart=G0-total&view=1&year=&state=UK) [UK Public Debt, 1980-2011](http://www.ukpublicspending.co.uk/downchart_ukgs.php?chart=G0-total&view=1&year=&state=UK) [UK GDP, 1990-2009](http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/gdp_growth_466_fin_v2.gif) The only correlation you’re going to find there is negative. Government borrowing and spending exploded in the last two decades, and GDP growth went down. And I find it interesting that your rebuttals always seem to be that I must be selective and misleading, and therefore I’m somehow expected to rebut myself, or face criticism for not being ‘fair’. But I thought that in a debate it was the other side who was supposed to bring their own version of the facts. If you want to show data that contradicts this, be my guest. ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [January 26, 2010, 9:50pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/30 "2010-01-26T21:50:43Z")
> [@Sam Stone](#): > > Germany spent a little more than half as much as the U.S. on its stimulus as a percentage of GDP. The IMF now predicts Germany’s economy to grow faster than expected. > > Canada spent a little more than a third on its stimulus as compared to the U.S. Canada is creating jobs, and our unemployment rate, which started out higher than yours, is now lower. > > Australia’s stimulus was about half of the U.S.'s. Australia’s economy is now expected to lead most of the world in economic performance Accepting for the nonce that these cite-free figures are accurate and relevant, I note that they don’t in any way contradict the assertion under debate in the OP, namely that increased government spending is needed to get out of a recession. The argument here is merely about the optimal size of the government-spending stimulus. > [@Sam Stone](#): > > And I find it interesting that your rebuttals always seem to be that I must be selective and misleading, and therefore I’m somehow expected to rebut myself, or face criticism for not being ‘fair’. No, my rebuttals are descriptions of ways in which you **are** selective and misleading. Merely noticing that you have a tendency to be selective and misleading—perhaps most annoyingly, in your tendency never to provide cites for any of your pontifical assertions until explicitly asked for them—is not a rebuttal. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [January 26, 2010, 9:56pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/31 "2010-01-26T21:56:56Z")
> [@spazattak](#): > > Leaving aside the ad hominem prior to the bold text, **Sam** makes a fantastic point. Its all about transactions. The government shouldn’t be the one attempting to make the transactions - they should be facilitating them. The classic example of this is infrastructure - increasing people’s mobility and ability to communicate with each other - making transactions easy and predictable. That would tend to correlate to transportation and communications improvements as well as research in these areas. I don’t think the left has previously considered these a priority. Thank you, **Sam** , for pointing us in the right direction. I’m afraid you just don’t understand what I’m talking about. I’m not talking about literal infrastructure - I’m talking about _information transfer_. And that doesn’t mean the internet, either. It means a price system in which the prices of things communicate relative levels of supply and demand, future supply and demand and other factors people need to know to make rational decisions. One of the reasons inflation is so destructive to an economy is because it breaks the price system’s ability to transmit information. If the price of something goes up, is it because it’s now more desirable or more scarce? Normally, that would be the case, and it would be a signal to producers and consumers. But what if it went up because of inflation? What if it went up because someone got a wheelbarrow full of money from the government, which will be used up next month? Interferences in the market from outside forces make it harder to make good decisions. This has a long-term damaging effect on the economy. And thank you, **Voyager** , for that useless bit of vague ad-hominem. It contributed so much to the conversation. **Kimstu** : So far, it looks like I’m the only one who’s actually provided any hard data in this discussion. You have a lot of nerve telling me I’m the one not supporting my arguments. I’ve also provided much support for these arguments in other threads. Did you ever see the chart showing long-term economic growth in the OECD compared to the size of government of the various member nations? You might want to have a look at it. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [January 26, 2010, 9:58pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/32 "2010-01-26T21:58:32Z")
> [@Zephyurs](#): > > More interestingly, can demand be stimulated without increasing the deficit? Trickier question, but I think so. The marginal dollar for someone making 100kpa goes less toward spending than the marginal dollar for someone making 30kpa. So, a crass program of redistributionism itself might have a stimulative effect, my thinking goes. This is my thinking, & I actually started a thread last year saying, “raise taxes now!” but I don’t have the fancy econ terminology & no one was buying it. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [January 26, 2010, 9:59pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/33 "2010-01-26T21:59:49Z")
> [@Kimstu](#): > > Accepting for the nonce that these cite-free figures are accurate and relevant, I note that they don’t in any way contradict the assertion under debate in the OP, namely that increased government spending is needed to get out of a recession. The argument here is merely about the optimal size of the government-spending stimulus. Fair enough. And did I not specifically address that by talking about the relative economic performance of Canada, Germany, Australia, and the U.S. IN the recession, as compared to their stimulus size? > [@](#): > > No, my rebuttals are descriptions of ways in which you **are** selective and misleading. Merely noticing that you have a tendency to be selective and misleading—perhaps most annoyingly, in your tendency never to provide cites for any of your pontifical assertions until explicitly asked for them—is not a rebuttal. And when asked, do I provide them? And do they show that I was being accurate? My time is limited. I provide cites when asked, but I’m not going to write every message on this board as if it was a peer-reviewed paper. And interestingly, I seem to be just about the only one around here for which this demand is made. I’ll take that as a complement - a sign that you don’t really have a rebuttal, so you just fall back on assertions that somehow, somewhere, I must be distorting the ‘true picture’. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 26, 2010, 10:00pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/34 "2010-01-26T22:00:29Z")
> [@Kimstu](#): > > Accepting for the nonce that these cite-free figures are accurate and relevant, I note that they don’t in any way contradict the assertion under debate in the OP, namely that increased government spending is needed to get out of a recession. The argument here is merely about the optimal size of the government-spending stimulus. It was noted in the Times last year, perhaps by Krugman, that the European Social Democracies had far better benefits for the unemployed and underemployed than the US did, including, of course, health care. This level of security propped up consumer spending, and thus made a stimulus as big as ours unnecessary. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [January 26, 2010, 10:13pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/35 "2010-01-26T22:13:54Z")
> [@Sam\_Stone](#): > > You’re not going to get out of the recession until the government _stops_ spending so damned much money. This is a recession driven by excessive debt, massive over-leveraging, and and fiscal imbalances that have capital markets running scared. You just don’t spend your way out of something like that. > > What this economy needs is stability. Obama’s got to stop announcing major new regulations and spending programs every second day. Look at what happened to the markets when he started talking about taxing banks. Investors are spooked, and the federal government is running round shouting at them. > > The best thing for the economy right now would be a moratorium on new regulations, a serious plan to pay down the deficit in the long term (probably by holding government growth under GDP growth, as we did in Canada), and a stable tax structure. > > This isn’t going to be a fast recovery no matter what the government does. But if it keeps trying to ‘stimulate’ the economy with more fiscal shock treatments, it’s going to turn a slow but steady recovery into a chaotic series of fits and starts that will ultimately result in a longer recovery and a huge debt at the end of it. Wrong, reasonable but wrong, reasonable but wrong, right. Actually, we do need some new regulations, or rather the reintroduction of old ones: the ban on bucket shops, so this mess doesn’t repeat; & constraining the profitability of moneylending as opposed to businesses providing tangible goods & services (_id est_, a new usury law). But I think you’re right that short-term “shock” stimulus is a waste. It’s weak tea. We need long-term investment, & we need to stop building more highways we don’t need & look at what we do need now. For a start, I suggest putting it in public engineering in hurricane-prone districts, & medical education. The latter could even educate doctors for Sam’s country so they can stop poaching South Africa’s. ---
**Author:** ![mswas](https://avatars.discourse-cdn.com/v4/letter/m/e99b99/32.png) [@mswas](https://boards.straightdope.com/u/mswas)\ **Post date:** [January 26, 2010, 10:16pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/36 "2010-01-26T22:16:15Z")
What the hell is going on? Isn’t this the opposite of stimulative? ---
**Author:** ![mswas](https://avatars.discourse-cdn.com/v4/letter/m/e99b99/32.png) [@mswas](https://boards.straightdope.com/u/mswas)\ **Post date:** [January 26, 2010, 10:21pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/37 "2010-01-26T22:21:39Z")
Didn’t see \*\*Leaper’s \*\*thread. You can close this one. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [January 26, 2010, 10:22pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/38 "2010-01-26T22:22:13Z")
He’s proposing a freeze on non-security discretionary spending only (for 3 years)…which is, IIRC, a fairly small percentage of the over all government spending. This actually gives him some kudos and cred with fiscal moderates, and it seems like a good sign, to me, that he is willing to be conciliatory, even in the face of possible head-buttage with his own party over this thing. -XT ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 26, 2010, 10:25pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/39 "2010-01-26T22:25:48Z")
> [@msmith537](#): > > Our economic problems are not being caused by CEOs and bankers getting rich. That’s idiotic populist nonsense that allows “Main Street” to absolve themselves of any accountability or responsibility. In reality both Main Street and Wall Street are to blame. > > Banks litterally make money by lending. They don’t stay wealthy by not lending to people. OTOH, they don’t stay wealthy by lending to people who can’t or won’t pay them back. That’s what got Bear Stern and Lehman into trouble. The objections to bankers getting rich these days is that they keep getting richer despite the fact that their policies nearly destroyed the economy. I agree that them getting rich is not the root cause, except inasmuch as they approved riskier transactions in order to get richer. The problem with the investment banks was not that they made bad loans. One big problem is that they traded and owned a lot of paper based on bad loans, loans which they did not originate. The big problem was that their risk models did not include the likelihood that the housing market would collapse, or the likelihood that AIG could not cover all the losses. I believe most of the big profits the banks are making today come from trading, not from loans, so your statement that banks don’t stay wealthy by not lending doesn’t seem to be true. I think the anger about the lack of lending is that much of the public thought that the bailout money went to allow the banks to increase the amount of lending, not for bonuses or to improve the bottom line or be used as leverage for trading. It appears that banks are not only not lending to bad risks, which is fine, but not lending to even reasonable risks. > [@](#): > > However, investing in highways, ports, airports, telecom networks, energy and so on indirectly creates wealth by making it easier and more desirable for businesses to do business here. OTOH, we have all heard about highways and bridges to nowhere. Luckily we have plenty of bridges to somewhere we need to fix. The stimulus money being spent to fix roads near me is not make-work. My new cars shocks are very grateful for the work being done. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [January 26, 2010, 10:47pm UTC](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481/40 "2010-01-26T22:47:03Z")
> [@Voyager](#): > > The objections to bankers getting rich these days is that they keep getting richer despite the fact that their policies nearly destroyed the economy. The main objection is that bankers are getting richer while so many Americans don’t even have jobs. I don’t think it really matters how they are getting richer. > [@Voyager](#): > > The problem with the investment banks was not that they made bad loans. One big problem is that they traded and owned a lot of paper based on bad loans, loans which they did not originate. The big problem was that their risk models did not include the likelihood that the housing market would collapse, or the likelihood that AIG could not cover all the losses. I believe most of the big profits the banks are making today come from trading, not from loans, so your statement that banks don’t stay wealthy by not lending doesn’t seem to be true. Investment banks make money financing deals and trading. Commerical banks make money by lending to people and small businesses. Of course since Glass–Steagall was repealled, most of them do just about everything, which IMHO is part of the problem. The reason these sort of regulations are in place is not to keep banks from getting rich. It’s to keep them from getting rich in the short term from doing stupid shit that will fall apart in the long term. [Previous page](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481.md?page=1) [Next page](https://boards.straightdope.com/t/is-it-possible-to-improve-the-economy-without-increasing-government-spending/526481.md?page=3)