Wars can stimulate the economy (rant)

Askthepizzaguy

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I believe WWII helped pull America out of the depression.

Not even to disagree with Skwink, but I'd like to suggest that here's a point that is almost universally agreed on by the general public. WWII was great for America, even though our national debt, deficits, and so forth skyrocketed, lives were lost by the hundreds of thousands, and it was ruinous for several countries around the world. Lots, and lots, and lots, of negatives. But we WON, that's the important part, right?

How did the economy turn around, may I ask? Are bullets magical, and do the manufacture of bullets cure stock markets?


This is in stark contrast to those who look at our current economic woes and suggest that government spending is the big devil behind it all. Hmmm! Trillions spent on war good, trillions spent on helping sick people get medicine bad.

War good, medicine bad.

War good, bailouts bad.

War good, social security bad.

War good, clean energy bad.

War good, infrastructure bad.

War good, research bad.

War good, public education bad.

So, extremely high tax rates for the purpose of obliterating human lives good, gigantic deficits based on military spending good, deficits based on feeding and curing people bad.

Just trying to make sure we're on the same page, here.

Ideally, it would be great if we could have a balanced budget or a budget surplus, like any responsible household. But, if our wife is sick for example, the budget becomes less of an issue, and keeping her well becomes the top priority. In our own household, we don't cut off medical care to our family members because it gets expensive, even if it is budget-breaking.

What's even more interesting, is we had a balanced budget and a budget surplus before, and we still had the same social security programs and medicare and welfare programs as we do now. Some reforms took place, to cut some waste and corruption, and that's sane and reasonable. But, we still had social security and medical care and welfare for the recently unemployed.

The economy was doing better then, sure. But we also hadn't done the decade of tax cuts for the wealthiest among us thing, so we also had higher tax rates.


What does this all mean?


1.) Government spending can stimulate the economy, and it has.
2.) The economy can thrive even with higher taxes.
3.) Lower taxes does not cure the economy.
4.) A balanced budget is possible even while taking care of our own citizens.


If you factor in the tax cuts and the costs of these several wars we are in, our budget could have stayed balanced, and we could have taken care of our citizens.

The folks railing about the budget insist that we slash funding for vital things like social security and medicare, but also insist we continue to extend tax cuts for the wealthiest among us, in a down economy, where the middle class is shrinking and unemployment is high, and under-employment is high, while the richest among us are doing quite well (stock market is doing great, and the only class that is prospering is the.... duh.... wealthiest class).

So, blowing up things in other countries on a credit card, and racking up future charges for medical care for our veterans GOOD, but taking care of the people in our own country who are already sick and need care BAD.


Death, destruction, ruination of nations, innocent civilian casualties, and doing it all on your Mastercard GOOD.

Ending the temporary tax cuts for the wealthiest among us because we can't afford it, never could have afforded it, and it's not magically curing the economy BAD. Keeping funding levels for social security and medicare on par with the needs of our people BAD.

Putting tens of thousands of our own people in harms way, and getting them hurt, and putting them on the government dole for the rest of their lives while they collect medical care and pension and so on and so forth (which they rightly deserve) GOOD, but trying to limit the number of people that get put in harms way and not starting wars of choice BAD.

I'm just trying to understand the consistent logic here.

Extending tax cuts for the richest and most prosperous among us, in a time of WAR(S,S,S), while our budget isn't balanced, after a decade of lower taxes, even though leaving the tax rates where they are isn't curing the economy, that's GOOD!

Trying to fix budget shortfalls with tax hikes on those who can afford it BAD!

Keeping social welfare benefits the same, so people don't go without medicine or the ability to live in a structure and eat, that's too much to ask, we can't do that. But, we can afford:

  • More wars
  • Extension of tax cuts
  • More tax cuts
  • Paying farmers not to grow food
  • Subsidies to for-profit oil companies
  • No-bid contracts for military equipment the military no longer needs, uses, or wants.
  • Sending tax dollars to prop up foreign governments
  • Sending weapons to countries that abuse their own citizens and suppress their rights
  • Doing all of this above cost, by paying interest to other countries on the loans it takes to pay for this when we have no money


This is fiscal responsibility?

The first thing we cut on our list of things to cut is medicare and social security, for the poorest among us?


That makes total sense.

Wealthy are doing great. Wealthy have enjoyed a decade of tax breaks. Wealthy are the only ones in this economy doing well. In fact, they've never been better. The disparity between the wealthy and the poor is staggering, and the gap gets bigger and bigger by the day, while inflation makes the poor even poorer, and wages stagnate!

So, the very first thing we need to do, is take money away from people who have none, to pay Richie Rich a tax rebate he doesn't need, so he can buy another yacht, at a time when Richie Rich is doing well, and his company is doing well, but he still refuses to HIRE PEOPLE due to "economic uncertainty".

What's the uncertainty, we ask?

Tax rates MIGHT go up.

They MIGHT!

They just might.



So, lower taxes for the rich, it turns out, means that they still won't hire people.


So, I say, nuts to them. I'd be more candid, but this is CFC, and I'm not quite sure what censored bombs I'm allowed to drop here.

I would suggest, that, in order to be consistent:


  • People complaining about the budget MUST put tools on the table to fix the budget, including tax increases, or they can just shut the heck up about it. There is no such thing as a "bipartisan compromise" if you get 100% of what you want. Tough dooky. Put up or shut up, I say.

  • People suggesting that wars can boost the economy get a grip and realize that it boosts the economy for military contractors, who often contract outside the united states. That money leaves the country. It even gets sent overseas on great big palattes, in cash, and DISAPPEARS, and no one bats a freaking eye. Not to mention with no bids and limited oversight, the price for these things gets marked up by 50%, 100%, 1000%, or 10000%, BECAUSE THEY CAN AND YOU DON'T CARE. There's a difference between World War II and the current conflicts, big honking differences, and I don't know if you've noticed, but.... our economy is still not soaring!

  • People suggesting that we can't afford to pay for vital programs for the elderly, the sick, the poor, and the unemployed, need to realize what that means.

That means we can't afford farm subsidies.
That means we can't afford more wars.
That means we can't afford oil and gas subsidies.
That means we can't afford corporate tax breaks or loopholes.
That means we can't afford bailouts.
That means we can't afford aid to foreign countries.
That means we can't afford no-bid contracts.
That means we can't afford pay raises for congress.
That means we can't afford more loans to pay for all this.​

So that means, we shouldn't be raising the debt ceiling. It means we should be slashing or eliminating funding for each item on the above list.

And, let's prioritize. What do we cut first....

  1. Do we cut medical care to the elderly first?
    [*]Or do we stop paying farmers not to grow crops, and sending money to hostile, unstable, corrupt governments and businesses overseas?

Gee I dunno that's a hard one. But let's cut taxes some more, and blow up a few more countries while making up our minds. Obviously, the logical conclusion is, because social security and medicare takes up a big portion of the pie, that means it has to be the first to go.

You see, according to some folks, welfare programs make up a bigger percentage of our budget, and that means that they have to be cut first.

Because, based on no logic whatsoever, a budget pie chart should have equal size slices. It's more aesthetically pleasing that way. Therefore, the biggest slices must be cut first, because they're the most frivolous, most wasteful, and nothing bad will happen if we make those pieces smaller.

By virtue of the fact that they take up a larger portion of the budget.

Nevermind those palattes of money shipped overseas and then just plain turn up MISSING.

No, we've got to cut the payments for grandma's medication, because OBVIOUSLY, GRANDMA IS THE ONE RIPPING US OFF.



Priorities:

1) Discounted tax rates for the wealthy (Republicans won't even talk about the budget unless tax increases are OFF THE TABLE when the tax rates are supposed to be temporarily cut, as in temporary, as in they go back up higher later)

2) We can't touch the military spending, because that's vital and it's a time of war. We can't look at things which are obviously wasteful and cut them, even when the military agrees it is wasteful. That would be politically suicidal. I've got business interests to think about!

3) Subsidies are good, and if you cut them, prices will go up. Oh noes.

4) Propping up foreign governments is good. You cut funding their you'll abandon our allies. Oh noes. Not the beloved Egyptians! Whatever will we do without their help!?!

5) My state needs pork projects, because it makes my constituents happy. I will vote for those. However, I will also make a big show of suggesting the federal government's spending is out of control, and I'll pretend to oppose pork spending, while standing in front of cameras with big giant checks with the governor's name on it, smiling, as if taking credit for this money. Evil bad federal government, providing money to me which I then take credit for and suggest to my constituents that I'm doing great as governor because I'm giving them this federal money. I can have it both ways. No, I won't cut pork spending, are you out of your minds???


.......


57) Something about the unemployed, elderly, sick, or downtrodden. I suppose we should do something for them, if we can ever get around to it. I feel your pain. But, you need to pull yourselves up by your bootstraps, and get a third or fourth job. There, problem solved.

Meanwhile, let me lecture you about how the welfare makes us weaker because it gets people to rely on the government's help.

That's bad, in principle.


I'm a very principled man.
 
1.) Government spending can stimulate the economy, and it has.
2.) The economy can thrive even with higher taxes.
3.) Lower taxes does not cure the economy.
4.) A balanced budget is possible even while taking care of our own citizens.
Holy wall of text.

1.) Tax cuts (real tax cuts, i.e. slashing marginal rates) can stimulate the economy, and they have.
2.) The economy can thrive even with lower government spending, and arguably will do much better with significant entitlement and regulatory reform.
3.) Government spending doesn't, and never has, cured the economy.

People complaining about the budget MUST put tools on the table to fix the budget, including tax increases, or they can just shut the heck up about it. There is no such thing as a "bipartisan compromise" if you get 100% of what you want. Tough dooky. Put up or shut up, I say.
I'll defer to Friedman on this one: "Politicians will always spend every penny of tax raised, and whatever else they can get away with." In this sense, tax increases won't fix the budget at all. Cutting spending is the only solution.
 
If you believe wars create prosperity, then why are you decrying the costs of our present wars? Surely they are stimulating the economy!
 
The government isn't who is behind the two wars. It is Big Oil and Big Weapons.
 
it stimulating if the country itself has a robust "defence" industry. it create jobs and maintain jobs.

Plus, even better if you can sell the weapons to other countries.
 
That is quite a rant. I'm not sure how to respond. It seems like your main point is that it's ridiculous that people are saying the US can't afford any sort of social welfare spending, but that we need to keep funding the military with more money? I can agree with that.

Nothing magical about why war stimulates the economy. It's basic keynesian economics, that increased government spending can fix low overall demand, even if it's spent on something completely useless. War's are just the only way it's politically possible to do such large spending. Aside from politics, the government could get the same effect by just giving people money.

I would say... if you're looking for a consistent logic behind the government, ignore what politicians say and just focus on the result of their actions. Let's see what they've done, and try to find a pattern.

Tax cuts for the richest people- the rich get more money (obvious).
Military spending- most of this will go to military contractors selling the high-tech weapons to the military. The rich get more money.
Cutting social welfare spending- more poor people, more unemployment, lower wages. Higher corporate profits and more prisoners in for-profit prisons. The rich get more money.
Endless wars- more military spending, secure access to foreign resources, and the other countries which might have given us competition are devastated. The rich get more money.
Soaring government- an excellent excuse to cut more social welfare spending, and give the rich more money.

To me, the pattern is pretty obvious.
 
Not even to disagree with Skwink, but I'd like to suggest that here's a point that is almost universally agreed on by the general public. WWII was great for America, even though our national debt, deficits, and so forth skyrocketed, lives were lost by the hundreds of thousands, and it was ruinous for several countries around the world. Lots, and lots, and lots, of negatives. But we WON, that's the important part, right?

How did the economy turn around, may I ask? Are bullets magical, and do the manufacture of bullets cure stock markets?

You bring up a great deal, so I'll just try to address this one issue.

In those days America and much of the world was experiencing a severe economic downturn called the Great Depression. The Depression was far, far worse than the recent recession of two years ago. The Depression went on for more than a decade - severe unemployment in excess of 30% in some areas, widespread business failures, bank closings, bankruptcies, the Stock Market crash, etc., etc.

Western leaders like President Roosevelt tried various methods to end the Depression, such as job programs, but with little success - it continued into the late 1930's with only a very gradual improvement. British economist John Maynard Keynes argued that heavy government spending might free up capital and act as a sort of "blood transfusion" to the economies but few took his advice at the time. World War II began that massive spending that Keynes had advised. In America, first with lend-lease and then with it's own military/industrial spending, large amounts of cash were made available to the private sector to open up factories to build the planes, tanks and ships to fight the war. The unemployed returned to work. They made better money than ever - factories worked three shifts. Housing for the workers had to be built, putting construction workers back to work. Retail stores, theaters, and other secondary industries reopened and rehired. People could spend again - on furniture and clothes and entertainment - and they paid their taxes and bought war bonds to pay for the war. And young men who in those days made up the greatest number of the unemployed were drafted into the Armed Forces.

So WW II improved economics in America not because war is good - but rather because it stimulated spending increases. If you can find a way to get people and business to spend, that is what improves the economy. This Keynesian economic principle was behind the Bush/Obama spending (bailouts) policies in 2008-2009.

At other times war has been a burden on the economy. President Johnson's policy of spending on the Viet Nam war and the Great Society programs simultaneously, are thought to have lead to the inflation and wage-price spirals of the 1970's.

And obviously, as you correctly point out, war does not improve the economies of the losers.
 
The government isn't who is behind the two wars. It is Big Oil and Big Weapons.
Good thing you capitalized those non-proper nouns to make them scary! Next time, maybe you can throw in something about tobacco companies and Wal-Mart? There's plenty of scapegoats to go around, after all!

it create jobs and maintain jobs.
It's basic keynesian economics, that increased government spending can fix low overall demand, even if it's spent on something completely useless.
So WW II improved economics in America not because war is good - but rather because it stimulated spending increases.
Well, why don't we manufacture cars and then smash them? It would create all kinds of jobs, stimulate demand for steel and rubber, and provide much-needed profit to American automobile manufacturers. If cars aren't to your liking, we could have people dig holes. Then we could have other people fill them in. In the end, we'll all be better off because of it... right?

If government spending in massive amounts creates prosperity, why did the Soviet Union fail? Their economic system was entirely based on central planning and wasteful military spending. The same applies to North Korea which is constantly engaged in "stimulus" spending. Zimbabwe too; their regime destroys things and spends money. Now all they're left with is a country in ruins and money that isn't worth anything. Literally.

Aside from politics, the government could get the same effect by just giving people money.
Or they could just leave the money in the hands of the people that earned it? They should try that for a change.
 
Well, why don't we manufacture cars and then smash them? It would create all kinds of jobs, stimulate demand for steel and rubber, and provide much-needed profit to American automobile manufacturers. If cars aren't to your liking, we could have people dig holes. Then we could have other people fill them in. In the end, we'll all be better off because of it... right?

If government spending in massive amounts creates prosperity, why did the Soviet Union fail? Their economic system was entirely based on central planning and wasteful military spending. The same applies to North Korea which is constantly engaged in "stimulus" spending. Zimbabwe too; their regime destroys things and spends money. Now all they're left with is a country in ruins and money that isn't worth anything. Literally.

Or they could just leave the money in the hands of the people that earned it? They should try that for a change.
The idea is that the people who get that money would then spend it on other more useful things. They spend money, causing businesses to grow, which then gives everyone even more money to spend. If nobody has money to spend, businesses close, people lose their jobs, and have even less money to spend. That's the cycle we're trapped in now, and only government has a free hand to break the cycle.

I mean sure, ideally we could spend it on something useful like a public works project. But the important thing is just giving people money to spend. That's why WW2 ended the great depression- not because tanks and planes and guns were somehow useful in everyday life, but because it gave everyone a job and money to spend on regular businesses.
 
If government spending in massive amounts creates prosperity, why did the Soviet Union fail? Their economic system was entirely based on central planning and wasteful military spending. The same applies to North Korea which is constantly engaged in "stimulus" spending. Zimbabwe too; their regime destroys things and spends money. Now all they're left with is a country in ruins and money that isn't worth anything. Literally.


Or they could just leave the money in the hands of the people that earned it? They should try that for a change.

You answer your own question. The Soviet economy failed because of central planning. Yes, we should just leave the money in the hands of the people who earned it! Absolutely.

You'd make a fine Republican.
 
Where does that initial money come from?
Taxes cover the average spending, and deficit spending covers the stimulus during recessions. A wide variety of individuals and banks loan money to the government by buying government bonds. This is isn't radical, it's just basic economics.
 
...and deficit spending covers the stimulus during recessions. A wide variety of individuals and banks loan money to the government by buying government bonds. This is isn't radical, it's just basic economics.
The loans eventually need to be repaid and that money again comes from taxes, so the money isn't being created from nowhere. It's being taken from the private sector where it could otherwise actually provide for growth by being used to generate good and services people want. When you waste money, you waste money.
 
The loans eventually need to be repaid and that money again comes from taxes, so the money isn't being created from nowhere. It's being taken from the private sector where it could otherwise actually provide for growth by being used to generate good and services people want. When you waste money, you waste money.
Sure. The point of the loans is just to get the money sooner than we'd get it from taxes, so that the government can provide a large burst of spending to fight against recession. The problem with recessions is that the private sector just doesn't spend money, and it leads to a self-perpetuating cycle unless the government does something.

I mean, let's say you've got a large amount of money in savings, but you've just lost your job and you're not sure when you'll get a new job. Would you go out and spend a lot of money? No way! But if everyone has the same problem at the same time, no one spends, so no one gets a job.
 
I am fairly certain that the stimulative effect of American government spending during the Second World War was relatively trivial compared to the monetary effect of lots of European countries buying American war matériel and strategic resources in the rearmament period.
 
WWII boosted the US economy mostly by destroying our European competitors. Government spending also helped, but that was because it was foreign governments spending money here to get the things they needed to continue waging war, mostly before the US officially entered the conflict.
 
If you believe wars create prosperity, then why are you decrying the costs of our present wars? Surely they are stimulating the economy!

Were building hospitals, schools, roads in Afganistain and Iraq so we dont have to build them over here.
 
And, let's prioritize. What do we cut first....

1. Do we cut medical care to the elderly first?
2. Or do we stop paying farmers not to grow crops, and sending money to hostile, unstable, corrupt governments and businesses overseas?

The major concern with medical care to the elderly is not the current level of spending or even the increase in spending due to aging. It's that the spending is projected to runaway, if the current methods of allowing increases in this spending continue. Could the government continue to spend 20% of income forever on medical care? Of course! The efficiencies of gov't spending in medical care are obviously beneficial. But medical care is also a blackhole of diminishing returns ... and until that changes* .... with unsustainable levels of projected increase.

(and paying farmers to 'not grow crops' is, unless I'm misunderstanding, decidedly wise)

Part of the problem of the current recession is a failure of recognising the failures of human nature. The theory is to give people money, and they will spend it to improve their lives. This is the idea of unemployment insurance, for sure. You buy people a break in desperation, and they use that money to re-invent themselves. I just don't know if that's happening.

The stimulus spending/unemployment benefits was of three parts: giving money to people to spend (EI benefits), giving people temporary jobs, state support, and tax cuts. State support was actually a decent idea, because the US gov't can borrow those essential dollars more cheaply than the states could've. The tax cuts were ... tax cuts. The EI benefits, though, aren't being spent wisely. People spend too much on maintaining lifestyle and not enough on re-inventing. This is analogous to buying cars just to smash them! You're keeping people employed, but you're not getting sufficient productivity benefits (other than job training). EI benefits keep waitresses employed as you don't need to cut back on groceries, and it keeps advertisers employed as you don't need to cut your cable ... but there're supposed to be better places to spend your money! You're supposed to give your money to other citizens in order to increase your own worth. Not less spending (for the demand-siders) but different.


* This is what needs to change. I've said it before. We need an IT-like revolution in medicine, where you get exponentially more for your dollar if you delay your spending. It needs a shift in R&D policies, it needs a shift in investment spending in R&D, it needs retooling of policy. But it needs to be done. IF we get that IT-like revolution, everything changes.
 
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