Monday, September 06, 2010

Money is Money is Money

It's interesting that we hear people talk about bank, investor and corporate money sitting on the sidelines, waiting to be poured into a revitalized economy,1 or that the economy will come around as soon as consumers stop saving too much money.2

The recession has wiped out about $14 trillion in wealth and, contrary to the suggestion that driving the savings rate down to a near-zero level will bring the good times back, the period before the recession was an era of negative savings. Many people were spending more than they earned, spending every cent of equity they could pull out of their house, or both. Ah, but if only consumer spending were once again that high the good times would roll, right?

Along comes John Boehner, implicating an age-old question by yammering,
As the American people, facing near double-digit unemployment, mark Labor Day by asking, where are the jobs, the White House has chosen to double-down on more of the same failed 'stimulus' spending. Eighteen months ago, the Administration promised that if we passed their trillion-dollar 'stimulus' it would create jobs 'immediately' and keep unemployment below eight percent. Instead, millions of Americans have lost their jobs, and unemployment is approaching 10 percent. If we've learned anything from the past 18 months, it's that we can't spend our way to prosperity. We don't need more government 'stimulus' spending - we need to end Washington Democrats' out-of-control spending spree, stop their tax hikes, and create jobs by eliminating the job-killing uncertainty that is hampering our small businesses.
Seriously. The best evidence we have indicates that the stimulus has succeeded to the extent that it could, but that it was too small to do more. But more to the point, how do you pull out of a recession if nobody is spending? Boehner has never given a rat's patootie about facts, so don't expect to hear any answers from him except, perhaps, why we must give huge tax cuts to the wealthy.

It appears that when he's not mindlessly railing against the President, Boehner is happy to take credit for bringing stimulus funds to his district and that those funds create jobs.

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1. Reality or myth?

2. It is fascinating to me that Robert Samuelson, a man who wants to slash and burn Social Security, believes a 6% consumer savings rate is harmful to the economy. If his dream comes true, how does he expect people to support themselves, post-retirement, if they aren't saving substantially more than that?

It's also fair to observe that money doesn't disappear merely because it is saved - it goes into the financial institutions, which are free to invest or lend the money.

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