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Originally Posted by Steeeeve
It is evidence it does nothing to fix an economy though as that kind of increased spending is unsustainable. Your argument basically amounts to someone saying you can fix your money troubles by paying them off with a credit card or getting a money advance. A temporary solution is just not a solution..even more so when it risks even bigger consequences such as inflation.
The logic doesn't follow. You admit that once government spending went down the economy went down. Well later the economy went back up but it wasn't because an increase in government spending, it was an increase for demand of US products. What caused the increase in demand was basically the fact that no other production facilities were around. The government spending was irrelevant....assuming WWII could have been won without us spending a dime we would have had the same economic benefit.
In other words you could have government spending continually increase and your economy would look better but at some point that bill is due and you can't tax people 100% and you can't borrow money indefinitely. The second that spending is gone the people are left with nothing because no growth really existed and no demand was created. This is evidenced with the New Deal and WWII....government spending went down and the economy tanked, demand for goods and services went up and our economy did well. Providing goods and services is much more sustainable than government spending.
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Remember that Keynes did not call for having government spending continually increase. He called for government to spend and run a deficit when the economy is headed into recession/depression, at a specific point in the business cycle. His idea was not to have government spending be "sustainable," to quote your last sentence. Keyne's argument was to use government spending to counter the business cycle, which is known as counter-cyclical spending. And yes, this government deficit spending is a short-term solution to the immediate problem of depression/recession, to the downturn in the business cycle.
The analogy of the jump start is apt. Just as you use jumper cables attached to another power source to give an immediate jump to your car battery, you use the federal government to give an immediate jump to the economy. You don't rely on government deficit spending to sustain economic growth over time, just as you don't run your car off the other power source over time. You use the jump to get the car engine started, and the engine runs the car. Similarly, you use the jump of deficit spending to get the economic engine started, and the private sector economy then runs the car.
Your point as I understand it is that in the long run, it wasn't government spending during World War II that caused the economy to prosper, but the demand for U.S. products. But it was government spending that created the demand, by creating jobs that enabled people to buy the products. This is true of products purchased by Americans and of products purchased by people overseas. The U.S. government spent money on the Marshall Plan to build up Europe, in part to rebuild our trading partners and to enable Europeans to buy American products. Government spending served to fix the economy by helping to create jobs both at home and abroad, which in turn paid people wages that allowed them to spend money on products, which led to the demand for U.S. goods. Government spending jump starts an economy by enabling the demand for products that then goes on to fuel economic growth.