We have had this problem before between us....I am always thinking in "a perfect world" while you are thinking in reality of the situation. Seeing how this is a forum, and you and I are clearly in the minority, I doubt it really matters which way you view it.

I would argue that this is an impossibility. The only time this kind of worked was after WWII when we accidentally created an infrastructure. It wasn't build by a government project though but by private industry with the government being the customer. We also invented some nice technology that we could produce...and were half-way producing...in the US. A lucky break that could never be duplicated on purpose.

I see your point if you want to get into reality than this 825 billion plan will fail without question. Giving someone $7,500 for buying a house doesn't cause a factor to start producing some magic product...it allows them to buy a slightly more expensive house so they can foreclose on it. Giving money to schools for better computers helps Taiwan I guess but not so much the USA.

The plan is silly and no better than the Bush stimulus packages.

I'd also like to point out again (back to perfect world) that a "stimulus" package for purpose of helping the economy has never succeeded in the history of humanity...not just the US. If you argue WWII helped out than that was an accident stimulus (and I debate whether the spending helped here)...we weren't trying to do it, we were trying to win a war.

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I don't think it is fair to say we "accidentally" ended up with infrastructure after WWII. When the government was handing out money to build wartime production facilities they required that a plan be in place to convert the facility to peace time production when the war was over.

That said, what really fixed the US economy was not the government spending, it was the fact that Europes entire industrial infrastructure was destroyed. After the war we gave them a big loan to get them started, engineered brenton woods agreement to ensure that the money we were repaid with would have some value, and then basically commenced to replace all of Europe with our factory output.

So, it was not exactly an accident, but it certainly was not something we can re-create unless we want to bomb the hell out of Europe. Even that would probably not work because they would buy all their replacements stuff from the Chinese.

You have options in the middle of a world war that do not generally exist.

That does not mean that starting another world war is a good idea (though I know that is being floated as an idea in some quarters) because quite frankly we would probably lose. We won WWII with our manufacturing capability and prowess. We could produce tanks and ships and bullets and planes twice as fast as the enemy. Today we lack that, and, in fact, we cannot even replace most of our equipment without imports from Taiwan and Japan.

Also, the war in Iraq has exposed a serious weakness in the way our military is structured. For a long time now we have bought better hardware in order to make up for the poor quality of our recruits. The war in IRaq has shown us that if you take a piece of ignorant trailer trash and stick him a $40 million tank, he is still just a piece of ignorant trailer trash and he still does the same stupid stuff, he just breaks a $40 million tank while doing it.

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I had not read this as an incentive. I know they basically guaranteed a profit for companies and helped pay for the conversion to tanks which gave the companies a huge increase in profits and actually made them operate above the 50% they were operating at prior to the war (good job New Deal!). Combine with with the banning of every household good and basically you have a large demand at the end of the war. This is what I mean by accidental. If you can't by a waffle iron for 5 years I'd say the demand would be high at the end of those 5 years. The WPB was in charge of limiting the use of products outside of war production and making sure the economy was good but I don't' recall it being anymore than making sure it didn't collapse during the war. I could be wrong though.
And, like I said, the fact that no one could buy normal products for years. Exports and Imports didn't change much after the war.

So, it was not exactly an accident, but it certainly was not something we can re-create unless we want to bomb the hell out of Europe. Even that would probably not work because they would buy all their replacements stuff from the Chinese.

Wasn't there some evidence that showed the patriotism of the country actually helped out with this?

It worked in Vietnam didn't it?

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Very few of the new facilities that were built during the war (as opposed to converted) we private facilities. They were actually owned and constructed by the government and then lent to companies for production. They were ALL designed with civilian applications in mind because (thankfully) somebody in the government was smart enough to recognize that the war would eventually be over and if all those buildings were purpose built, they would be useless.

This is a lot of the reason that comparisons between WWII and today are pretty useless. The circumstances are so radically different that they are really not comparable.

Yes and no. Patriotism does encourage people at home to work hard and sacrifice for the war effort, but without the manufacturing infrastructure in place they may as well sit in a field and yell "go america".

Frankly I think that blind patriotism is part of the PROBLEM today. It has kept people from anything resembling an honest assessment of where our nation is at financially and the possible repercussions of that.

Americans swagger aroudn and talk about how great our country is, but consider this. In the same amount of time it took us to build 4500 stryker vehicles, a vehicle that was already a mature design with production facilities in place, we designed, built production facilities for, produced, and deployed roughly 20,000 sherman tanks.

People saw it as a challenge to the country and they stepped up to try to meet it. Today we are so arrogant and so complacent that we wave our hand at challenges and go "It does not matter because this is America and we dont have to worry about that ####".

Bad news. YES, we do.

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They did lease a lot of buildings for next to nothing but remember that factories were already at 50% or less capacity so building new factories was not a huge cost...compared to what it could have been. I think it was the head of the WPB that directed all of this...again I wasnt aware of the payment for conversion after the war. All that conversion would be worthless if demand wasn't there. In the end it wasn't exactly direct government spending...it was more indirect by blowing up half the world and not letting anyone buy stuff for years. Oddly enough this is what brings people out of recession. You don't spend a dime for years and then when things settle down you spend some money and you get back on track.

You can't give $500 to a guy that has no job and think he will make it last for years. That $500 won't even pay for the credit card debt.

IT could be argued that those folks really aren't patriotic but more like paris hilton. They think they are great but have no idea what you really have.

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What? You dont think the extra $10 per paycheck is going to change peoples lives and pull us out of this??

Exactly. And it seems like far too many are proud of stuff that quite frankly is dumb.

To anybody who did not know, I am sorry to be the one to clue you in, but being proud of your military is idiotic. Anybody can have a military just as good as ours if they are willing to spend the money. Fortunately (for them), most are too smart to blow all their national wealth on non value added military spending.

The US was not made great by blind patriotism and random cheering. Frankly we should all be ashamed of ourselves and I can virtually promise that previous generations would be. For generations this country was built by people who were willing to work hard not just to provide for themselves, but to provide something better for the next generation. The last couple of generations have done the exact opposite. The greatest generation spawned the most worthless generation, which then cloned itself.

Instead of working to improve the country for future generations, we have quite literally stolen all their money and saddled them with a debt that they cannot possibly pay. NOBODY actually believes that the steps beign taken will actually FIX the problem. They are all about trying to figure out how to steal enough from our kids to get us past this and keep us living high on the hog until we are old enough that they get stuck with the problem.

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If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

TRUTH!!

As you say, money spent on the military is gone; it adds no value to the economy.

Then again, we were warned by good old Republican President Eisenhower about the danger of the power of the Military/Industrial Complex way back in 1961.

I simply disagree with you that Keynes was wrong, and I disagree with you that the economic recovery from the Great Depression had nothing to do with government spending. Government spending directly produced the recovery.

You have argued, as I understand your posts, that government spending does not work to bring recovery because once the government infusion of money stops, the economy slumps back into recession. My argument to you is that this may or may not be true, depending on whether the government spending is sufficient to pump up consumption to the point where the consumption can revive private industry and get it growing again. In the "Roosevelt Recession" of 1937, FDR cut the budget in an effort to balance it, thinking that he should not continue deficit spending, despite what Keynes had told him. The economy slumped back into recession, and it sank to levels almost as low as in 1933, the worst year. When FDR increased the government spending again, the economy went back up. In the 1930s the government spending was never enough to really jump start the economy and keep it going, though New Deal spending did help the economy to some extent. The problem was that the spending was insufficient to trigger ongoing recovery, because people were not at a level where they could consume sufficiently so they could sustain an economic recovery. New Deal spending was a step in right direction, but the economy had sunk so low that the jolt of New Deal spending was not sufficient to produce consumption that sustained economic growth. World War II spending was sufficient, indeed more than sufficient. And as you yourself point out, the minor recession after World War II was just that: a minor recession. People had money to spend, because they had paychecks from the military and from doing war production paid for by the government. There was pent up demand that resulted from the massive government war spending.

The Marshall Plan, by rebuilding the economies of Europe, created trading partners and consumers of American products abroad. This was not a jump start to the U.S. economy, which was no longer in a depression, but this government spending on economies abroad helped to sustain American prosperity over time.

The question of whether giving an individual a temporary job will help the economy has to be understood in terms of the economy as a whole. Giving one person a temporary job is not going to boost the U.S. economy. Giving a million people temporary jobs probably will boost the U.S. economy. The key is whether the boost triggers ongoing economic growth, by relighting the fire of consumption and thus reviving the private sector. This happened after World War II, as people had money from government spending that they were eager to spend on consumer goods.

You can't have demand if people don't have any money to spend. Conservatives argue that we should give people money to spend by cutting taxes. In theory that does the same as government spending, except that it doesn't promote enough consumption to revive an economy that is in the doldrums. It's not strong enough medicine. People don't always spend their tax cut money, and people who are most in need of goods to purchase and are most likely to consume usually don't pay that much in taxes in the first place. Obama's stimulus bill contains significant tax cuts, probably too much in the way of tax cuts, which are not going to work. Government spending is the strongest medicine, the medicine our economy needs at this point.

Here is a link to an interesting article in today's NYTimes about FDR and government spending. It addresses what we have been talking about. http://www.nytimes.com/2009/01/27/bu...agewanted=1&hp

What you and steeeve both seem to be missing is that what we are talking about here is not really Keynesian. Keynes argued that government should put back money during the good years to expand spending during the bad ones in order ot even out economic cycles.

Have we put back money during our good years? Of course not. Even in our best years we cut taxes and run deficits.

In order for Keynesian economics to work you also have to assume that the required infrastructure is in place for a recovery. Typically economic recoveries happen when the inventory of goods falls to meet demand, at which point new production comes online. Today that is not going to happen. First, we would have to build a bunch of factories (it has been estimated that we would have to spend roughly $4 trillion to bring our industrial infrastructure up to where it needs to be to support our economy) and second, even if we had all the infrastructure in place, we still cannot compete with the Chinese without a MASSIVE adjustment to wages, which would push is right back into recession or depression.

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If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

Keynes did argue for running a surplus during periods of economic boom. We did that during the Clinton years; under Bill Clinton we had a surplus. The Bush administration ran up a huge deficit, which puts us in a tough position now, because we are going to have to run up the deficit much more.

Recovery can happen when demand for goods increases, which is what government spending does: it increases demand. The same is supposed to be true for tax cuts, though tax cuts do not boost demand the way government spending does. If we think of the economy as global today, increasing aggregate demand will help the world economy to recover. The demand for goods produced in China will increase.

I think there are opportunities in the United States for new kinds of enterprises, and government investment in promoting new enterprises will help to get them off the ground. That's a long term issue that we do need to address. The short term problem is the immediate economic downturn, and government spending can and must turn this around by boosting demand.

There is zero evidence of this! At best WWII indirectly helped but those are circumstances you can't reproduce.

Just to clarify, my argument is that their is little evidence to support the government spending does anything hurt us more when the spending stops and it is debatable it helps us while we are getting the money. During the New Deal unemployment was ridiculously high...even at the end of it (15%).

That "again" is WWII and when it stopped what happened? The economy slumped again. As Daewoo and I have been discussing it may be that WWII indirectly helped with industry build up and combined with the fact that no one was producing anything helped us out. This is a rare set of circumstances that almost never exist...and don't today.

A minor recession is still a recession and 2 years is not great. Furthermore, lets say the WWII spending did pull us out. Do you realize the spending that took place during that time and what that would cost us today? Luckily taxes were sky high then and not too much debt was taken on but if that level of spending is needed to only make us have a minor recession after the spending ends than we are screwed.

In any event, this isn't the case. We have had recessions where we didn't spend much more money (1990) and we did fine. We have had some where we lowered taxes and that did the same thing as doing nothing as well. There is no correlation between government spending an improving an economy. This is a correlation between massive amounts of debt/printed money and hyper inflation though.

It wasn't that much (we were paid back for some if it too) and is still irrelevant to your point. You are arguing now that we should always do government spending and this isn't what Keynes said. I'd prefer to stay on topic.

What happens if you print money so that everyone had a billion dollars. Will this increase demand or make the dollar worthless? See above for why WWII created a demand...it wasn't government spending directly.

we've had two stimulus packages so far and they didn't work. Japan did 10 or so in the 90s and none of them didn't work. The excuse is always "it was never enough" but apparently the only thing that is enough might be flattening half the world and depriving the other half of anything tangible for 5 years while building massive amounts of factories.

This theory is just like "trickle down economics"...it doesn't work but everyone still believes in it.

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I'm fully aware it isn't the exact theory he posed but neither is "supply side economics" talked about correctly when it is discussed here.

In any event, the theory is irrelevant because we treat it like "trickle down"...we think it is godlike but in the end it is nothing more than a inflation tool.

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This isn't exactly true. We had better spending habits but the debt went up every year under Clinton and we never ran a surplus...you have been fooled by Cash basis accounting. Clinton also delayed a lot of expenses which was no good. Was this better than Bush's spending habits? Yes. Did they still stink? Yes.

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He did not just advocate running a surplus, he advocated running a surplus and building reserves, which we did not do during the Clinton years because our surplus was nothing but an accounting trick and the surplus was built on the false prosperity of the dot com bubble.

But, the increased demand from government spending is not sustainable, nor is it even helpful if you can not meet that demand domestically. That was the problem with Bushs stimulus package. Everybody got a nice check, but over 60% of the money spent on consumer goods ended up overseas. We ended up spending a fortune and got a bunch of consumer #### that started depreciating immediately. Our trading partners got a bunch of cash that is earning them interest or paying for expansion.

No, they cant, because we do not have any means to meet that demand and increasing demand that just leads to exporting your national wealth is counterproductive.

Buying things does not create wealth. Marking things up does not create wealth. Wealth is only created through the production of tangible goods. There is no other way. There never has been. That is one of the fundamental laws of the economic universe.

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If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

I agree with you that wealth is created through production. For that reason, the loss of production to nations overseas has indeed harmed the U.S. economy. However, it's wrong to suggest that the United States does not produce wealth or that industries in the United States are incapable of responding to increased demand. There are also prospects for American entrepreneurs to develop new industries, and I think our government should encourage this. That's for the long run.

You seem to be making recommendations for long term economic growth, and that's important. My argument is about a short term stimulus to revive the economy. It can be done, because it has been done.