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When and where has cutting government spending during a recession or depression ever helped an economy recover?
21 Answers
- 10 years agoFavorite Answer
I see lots of B.S. here and not a single, logical, objective answer to the question so let me elaborate with actual facts. You remember facts don' t you people, what people relied on before talk radio.
The last time raising taxes got us out of a recession was 1992 - when King George Bush the 1st infamously raised taxes. Which actually paved the way for King Clinton's dream eight years. I'd also suggest all you yahoos who CAN read check out some objective nonpartisan web sites like FACTCHECK.org or perhaps look up the actual CBO reports and other nonpartisan documents before you go repeating what college-drop out, former alcoholic drug addicts tells you. Would you take financial advice from a former drunk? You can only cut your own household budget so far - then you need to go out and get a second or third job, steal or start selling drugs.
That being said, government budgets tend to go from surplus to deficit (or existing deficits become larger) as the economy goes sour. This typically happens as follows:
The economy goes into recession, costing many workers their jobs, and at the same time causing corporate profits to decline. This causes less income tax revenue to flow to the government, along with less corporate income tax revenue. Occasionally the flow of income to the government will still grow, but at a slower rate than inflation, meaning that flow of tax revenue has fallen in real terms.
To help push the economy out of recession and to help those who have lost their jobs, governments often create new social programs during times of recession and depression. Government spending then rises, not just because of increased use of existing programs, but through the new programs.
As a result, money starts flowing out of the government faster than it comes in, causing the government's budget to go into deficit.
Can you follow that linear logic?
While we're recalling history here, let's look at 1937, when it looked like the U.S. economy was finally about to emerge from the Great Depression and what happened? Unemployment exploded, production, profits, and wages, all of which had returned to their 1929 pre-Depression levels, sank.
What happened? The government, in its desire to avoid deficit spending at all costs, cut significantly back on spending. The Works Progress Administration and the Public Works Administration, which had together so successfully moved consumer demand up during the early Depression, saw their budgets significantly cut. PWA projects were halted.
As a result, unemployment increased, manufacturing output sank, leading to more layoffs, leading to even fewer consumers with money to spend. Sound familiar? Anyone? (And where are those private sector jobs the GOP promised in 2010? Notice politicians only talk about jobs during elections.
But who is benefiting in this 21st century Great Recession? Answer: the SUPER RICH. The one group that benefited - and will continue to benefit the most- from the Bush Era tax cuts - which like the 2003 Medicare Part D drug benefit and the two wars- are NOT PAID FOR AND ADDED TO THE DEFICIT. Do you see Congress calling on us to cut the deficit-ballooning tax breaks for those making more than $250K or Medicare drug benefits? No, so much better to cut a health care program that actually will REDUCE the deficit.
Every real economist agrees the RICH are not taxed at the same rate as the working and former middle class and they haven't been since your beloved senile REAGAN. How to solve the deficit and end the recession - TAX THE RICH, the hedge fund operators that pay on 15 percent capital gains and Wall Street moguls awarded six-figure bonuses for f-ing up the economy and profiting off it, too.
As for you less government regulation idiots. King Clinton retracted the Stengall-Glass Act (do you even know what that is yahoos) is what lead to the mortgage and financial mess when coupled with greedy people trying to "flip" homes for a profit in a booming and falsely inflated real estate market (didn't your momma tell you if it looks too good to be true...). Sounds a lot like the U.S. in the last 1920s when everyone was trying to make a buck on the "you-can't-lose" stock market. And who didn't lose money during the depression...hmmmm.
Do you really want less government regulation over your food and water supplies? How about lead content in toys? Air traffic controllers, unnecessary. Health insurers, I'm sure they have a very good reason for raising your premiums 25 percent, don't question.
So, many of you trust corporate big-wigs who fund politician misinformation campaigns with your lives? Really?
I suggest all you cable-TV addicts open your eyes. You are being DUPED by the Right and the Rich. The poor, working class, and middle class you're ALL POS to these people - they LOVE IT when you fight among yourself rather than actually UNITE against them.
Source(s): Factcheck.org, mediamatters.org, politifact.com - Anonymous5 years ago
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Depression Free Method?
Source(s): https://bitly.im/aNR7O - Anonymous5 years ago
It would not end the recession, any positive effect it would have would be for long term growth unless the tax cuts were greater than the spending cuts so increasing the deficit. As for deregulation it would depend on what was deregulated, Countries the had stricter regulation of their financial market have done much better during the current recession.
- StuLv 510 years ago
Government spending is a good thing when there is money available to be spent. When you have to borrower money to cover the interest on money you borrowed in the first place, that's another story.
If huge government spending will "help an economy recover," what happened in Germany prior to Hitler? Plenty of government outlays, no recovery. It doesn't work.
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- wtincLv 710 years ago
Ronald Regan did just that and turned things around. Check out 1981-82 right after the 2nd worst president left office Jimmy Carter when unemployment was 9 % interest on a home lone was 22%.
- jwthoughtsLv 710 years ago
That is a trick question. They have NEVER cut government spending.
But as Einstein said, "Insanity is doing the same thing over and over and expecting a different result"
IT IS TIME TO TRY SOMETHING NEW.
Will it work? Well, when a business is suffering a "recession" they CUT SPENDING AND SURVIVE!
- 10 years ago
Ask where spending has helped.. Yes it got us out of the first depression, but lined the way for a future one... I think cutting spending is great... less money out of your pocket. Also look at our debt... How do you expect to get out of it if we keep spending the same amount that got us into it... This isn't a great answer to your question more of food for thought.
- KaciLv 510 years ago
I have watched many economists on the news discuss this very issue. The consensus is if all the people in America were taxed 100%, we still would not be able to pay off our current debt. When has spending more and more and more ever led us into a recovery?
- ?Lv 510 years ago
Man. This is the problem that I have noticed. I work for the DOT and the money spent in infrastructure is being used in places that are not beneficial and have no return rates (like national forest roads)...this money should be put into transits and stuff. 193 billion spent on roads not being used
- Anonymous10 years ago
When first exploding spending did not help. Cutting it back to the levels it was when it started will not hurt.
The government can not create anything. They only Destroy, or do not destroy. But they do NOT create.