Friday, April 30, 2010

Economic Non-sense from Jerry Moran

The other day I heard Rep. Jerry Moran proclaim in a radio ad "you can't spend your way" out of a recession. 

Does Moran think we can "hoard" our way out of the recession?  Does he imagine that we can get out of the recession, if everyone spends less today than they spent yesterday?

What non-sense.  Collectively, as an economy the only way to get out of a recession to spend our way of it.  Keynes called this the paradox of thrift.

A recession is a lack of effective demand.  There has been a precipitous drop in investment spending by corporations.  Due to rising unemployment, the collapse of the housing bubble, and uncertainty, consumers are spending far less. State governments are cutting back drastically.

The only sector of the economy that can pick up the slack is the federal government.  Stimulus spending has kept the economy from entering a free fall and now seems to have sparked a turnaround.

Now, the stimulus was too small because of the opposition of folks like Moran.

There is that scattereth, and yet increaseth; and there is that withholdeth more than is meet, but it tendeth to poverty.
The liberal soul shall be made fat: and he that watereth shall be watered also himself.

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