Monday, January 14, 2013

Want Economic Growth Now? Increase Government Spending

By: Dale Bowling

Economic growth doesn't just happen for no reason. It happens because money gets spent.

The advent of the Bush Recession meant that the Private Sector (individuals and businesses) saw its
income drop off sharply so there was less money to spend, more debts to pay off and more worries about
the future.

In previous recoveries when the Private Sector showed up with empty pockets, government spending
temporarily filled the gap.

During the Reagan Recovery of the 1980s, Big Government came into its own. It's well known that Reagan tripled the Deficit. Under Reagan, government spending was strong at all levels- Federal, State and Local and this helped fuel the recovery of the 1980s that Republicans say they like so much and that we should embrace as a model for our current Recovery.

Contrast this with what we have today. Federal spending is way down- the lowest its been in decades.
Aid to state and local goverments has been sacrificed at the altar of fiscal austerity. At his current rate
of spending, Obama would have to be President for 20 years to spend as much as Reagan did in 8. In
the last two years trillions of dollars have been cut from the Federal budget and Republicans still want more cuts.

And what this has primarily yielded is job losses. Because as much as Republicans would like everyone to believe that Government is merely taking your tax dollars and flushing them down the toilet, what they really do with them is pay for things - mostly for you and me.

Like when Big Government builds a highway - they pay workers to do the job, they buy materials from businesses for construction, vehicles need fuel and servicing, etc. Money gets cycled back through the economy, Americans get back to work and America ends up with a highway. It's a good deal for everybody.

If Government had been allowed to grow at the rate that it did under Ronald Reagan rather than face
repeated cuts, we'd have over a million more jobs than we do now and unemployment would be a full
percentage point lower.

Over 200,000 teachers have been laid off since the beginning of the Bush Recession. They were joined on the unemployment line by 56,000 policemen, 44,000 firefighters, 20,000+ first responders. These job losses hurt more than just the economy; they hurt America.

And this doesn't even mention all the private businesses that do work for taxpayers and have suffered
from this austerity.

Now don't get me wrong, eventually all this spending needs to be paid for. That day comes when
America's economy is back on its feet and the Private Sector can fuel economic growth without
government help. Remember when the huge deficits of the Reagan years came due and President
Clinton had to raise taxes and cut spending to pay for them? That was in a boom. And what happened?

The Deficit was paid down without wrecking the economy.

So the main thing to take from all this is that the current set of priorities are all wrong. The time
honored thing to do is for Big Government to step up its investment in America, create jobs now and
pay down the debt later. America has done this countless times since the New Deal. We know it works.

Why are we talking about further cuts now when they can only hurt the economic growth we need to
get out of this crisis entirely?

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