http://www.nytimes.com/2011/02/23/business/economy/23leonhardt.html?ref=economy
This article takes on two different approaches to economic recession, austerity and stimulus spending. The author argues that austerity, can hinder a governments efforts to put the economy back on track, since austerity is a backlash to the overspending euphoria which causes bubbles to form. However, I don't completely agree, especially when economies are crashing left and right from uncontrolled spending and unsustainable policies. What are your opinions?
I agree. The article states that "Germany's austerity didn't last long as its boom quickly turned into an economic slowdown, while output in the U.S. has recovered during the stimulus. I think there is probably a happy medium that involves cutting certain wasteful military programs and inefficient social programs but also increasing spending in certain areas, perhaps education.
ReplyDeleteAgain, it seems that whoever has the power between the Republicans and the Democrats. No one seems to have an idea of where the money will come from that believe are putting their faith in. Interest rates are low and the government is trying to encourage spending; this is how we escape a recession. Yet, people are nervous about spending again due to the uncertainty of the market. I guess it seems important to compare ours to foreign markets to see how ours is progressing. We all hope within a few years we will return to a strong economy that will not be based on speculation like before.
ReplyDeleteI think such government spending is helpful and encourages spending. Once people feel comfortable spending and strengthening their economy, this recession will resolve itself. That being said, such government spending should be regulated and I agree with Dave and the many others who support spending on education and perhaps less on military expenses
ReplyDeleteThe line that most resonated with me was when they said that if the private sector is not spending then the govt has to - otherwise no one will. This I believe to be true. National income/GDP is aggregate consumption in an economy (C + G + I + X - M). If its a recession then that means that C and I are going down and have gone down. Thus, the govt needs to spend and the policy of giving tax cuts to the investing segment of the economy also makes sense since this will bring the economy back up.
ReplyDeleteHowever, I agree that there should be a balanced budget since the govt bearing the full burden of maintaining growth does not make sense and at some point the private sector needs to come in. If the budget is balanced then C will be increasing along with lower levels of G + I and the economy would recover again! I haven't bothered to talk about X and M cause we havent really spoken about imports and exports.
This article brings up an interesting approach to recovery. It seems that we have been mainly discussing cuts in government spending as well as increases in taxes as ways to decrease the budget deficit and pull our country out of the recession. But, this article suggests quite the contrary; it suggests that government spending has actually lessened the severity of the hard economic times and will help our country crawl out of the financial/economic crisis. Like Dave mentioned, it appears that there should be some sort of happy medium with government spending. The problem lies in discovering just the right formula of spending that will pull us out of these harsh economic times.
ReplyDeleteI see spending as a very important factor in digging ourselves out of this recession, however we need to be careful how and what we spend on. Instead of being afraid of spending we need to look at it as an opportunity and spend very wisely. As others have mentioned decreasing spending, in areas like defense spending, will also play a crucial role in this process of getting out of the recession.
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