17 Feb 2014 5:42 am
Do you understand how economic stimulus is supposed to work? The idea of economic stimulus (demand-side) is to increase the overall demand for goods and services. Exactly how do you accomplish this by increasing overall government expenditures in the military (the bulk of Reagan's budget increases). Tanks and weapons are not overall goods people purchase in the private sector, so I don't understand how you believe the government spending more on these things would increase the overall aggregate demand for other goods and services in the economy.Cannonpointer » 16 Feb 2014 11:29 pm » wrote:
Finally, a post with some teeth from you - a post that takes a good hard punch at the OP. I was beginning to think you a dilettante and a cheap seater - my apologies.
Now, I have a couple of questions for you:
How do we properly account for the fact that Reagan used Keynesian economic stimulus, and Carter didn't? When you add a couple of trillion dollars of debt to the economy, are you not essentially eating tomorrow's supper, today? Reagan inherited an economy of 3 trillions, then BORROWED two trillions - and then claimed he "added" it to the economy - did he not? Hell, I can take 3 dollars, borrow 2, and say, "Look! I turned 3 into 5! Dayum, I am GOOD!" Isn't that what Ponzi did?
I mean, if you judged my CREDIT LINE as part of my personal "economy," it would make my economic picture look pretty damned flattering. When the precious, precious unborn are PAYING for Reagan's "good" economy, will it still have been all that "good?"
Also, how much of that "economy" was new government workers? How much of it was manufacturing bombs and missiles (some of which ended up in Iran) - MORE Keynesian stimulus?
Sure, spending added to GDP, but no economist would actually consider it stimulus (no serious economist, anyway). The money never actually made its way into the economy. Notice the Velocity of the money supply, which is the ratio at which money is actually circulating. Velocity of money is essentially flat during the Reagan administration.
And I don't know how you think GDP works, but the government doesn't simply add it to the economy by borrowing it. GDP = C + I + G = NX. Government expenditures contribute to the G component of GDP, while Private Sector consumption contributes to it with C (Personal Consumption Expenditures). If anything, Government expenditures became less of a contributing factor as a part of GDP during the Reagan Administration, while Private Sector consumption slightly tapered off due to the increase in interest rates.
Simply put, the economy grew simply because the economy got better. Government spending wasn't driving it.
Reagan had a better economy. Under Carter, the labour force grew by 10,241 thousand, while the amount of employed persons increased 9,955 thousand and the population grew 11,191 thousand. Employment was not keeping up with population growth (hence, the stagflation).The issue here is who was better for the economy - not who was better at big borrowing and big spending. Goofy and Clem will curse Keynes all day long, then extol the virtues of Reagan on the economy.
Under Reagan, labour force grew 15,148 thousand with employed persons increasing by 18,399 thousand and the population growing all while the population grew 16,364 thousand.
http://research.stlouisfed.org/fred2/data/PAYEMS.txt
http://research.stlouisfed.org/fred2/data/CLF16OV.txt
http://research.stlouisfed.org/fred2/data/CNP16OV.txt
The economy overall experienced better economy growth, labour force growth and income growth during the Reagan administration. Granted, you will experience more growth in times of economic recoveries, but that is the point. During a recovery, the economy should look as if it is receiving, not stagnating like what is currently happening.