Republican morons have been citing this fictional “economics class” for a long time. This is the type of simple minded anecdotes they pass off as wisdom that makes rednecks stop and think “wait Obama, Clinton, etc. is the reason I’m living in a trailer park.”
Problem with counter-cyclical government spending is that it doesn’t ever get pulled back. New spends just stay, so it’s really just a governmental spend grab in recessions that sticks around…
Anyone who worked on enough group projects in school where the entire group receives the same grade has likely experienced free riders. In my experience, they are very quickly identified by the “market” and have a very difficult time finding group-mates for the next project.
In general, I support countercyclical spending, but jcole21 raises a valid concern. Automatic stabilizers, such as progressive tax rates and unemployment insurance are good ways to deal with that, since they automatically reduce when things get better. The other issue I have with the standard Keynsian response is that it ultimately does matter what government spending is spent on. There’s a part of Keynes work where he suggests that paying people to dig holes in the ground and then paying them to fill them up again will help stimulate demand enough to prime the pump. That may be true, but it would still be better to construct something that improves productivity, such as a highway, or a better electrical grid, or centers for innovation in small business. Part of the challenge is that when an economy is in trouble, politicians feel that they need to intervene in some way to make it better. Not doing so makes them vulnerable to attack at re-election time. And so spending can become a kind of personal empire building project, where people increase spending not because it is necessarily wise or productive, but because it gives representatives a chance to say “Hey, I did this for you.” This may also explain why many fiscal conservatives also need to be social conservatives. A liberal spender can say “Hey, I got the government to send x, y, and z to our district, and that’s good.” A conservative guy can’t say that if he/she is trying to reduce government spending. Therefore they can say only one of two things: “Hey, I cut your taxes” (which may not be good for the deficit), or - failing that - what’s left is “I can’t bring government goodies here, because we’re cutting that down, but at least you don’t have to worry about gays getting married, because I’m defending you from them.” (that’s not my political position, but it may be why it’s hard to be fiscally conservative without being socially conservative too). It’s just hard to get re-elected on the grounds that “I just sat there and ensured that the government did nothing,” even if - in theory - that’s what conservatives would like.
unfortunately bchad is right. in one way or another, goverment reflects either the will of the people, what they’re willing to tolerate, or what they’re too lazy to change. there’s a saying out there that goes something like, “democracy is doomed to fail when enough people realize that their vote can be bought”. true unfortunately. there enough people out there who want something for nothing. freeloaders, corrupt politicians, corporate welfare recipients. They’re all cut from the same cloth and they’ve ruined what could be a more prosperous country for everyone willing to take only what they’ve earned.
Counter-cyclical fiscal policy is a completely separate beast from government ownership of the means of production which is also a completely separate beast from redistribution of wealth/income. At low levels of intervention, none of these are particularly distortionary (for instance if the government took a penny from everyone, it wouldn’t impact much, or if the government provided national defense). However, the ownership of large amounts of the productive capacity of an economy by the government is far more destructive than “Keynesian” fiscal policy or 50%+ marginal tax rates on rich people. If the central bank is doing its job, then fiscal policy is not really needed since the central bank would offset whatever the Congress will do. In a world where the central bank isn’t doing it’s job well (like by trying to target interest rates while in a liquidity trap), then fiscal policy will shift aggregate demand and help the economy recover. However, fiscal policy is effectively diverting real resources away from their best uses. An increase in government spending to fill holes shifts aggregate demand in a manner similar to monetary stimulus, but the money is spent on projects that do not lead to a long-term expansion of the productive capacity of the economy. With monetary stimulus, the private sector still has the responsibility for directing how the injected money will be spent. Hence, monetary stimulus is likely more effective and need not make these real distortions of fiscal policy. Further, if some infrastructure project would enhance the productivity of a region in a cost-effective manner, then it should be done for those reasons and need not be defended by relying on short-term fiscal stimulus arguments.