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Tuesday, October 25, 2016

President Roosevelt’s legacy of public works programs offers insight into the importance of increased government spending to create jobs and restore the economy.

It’s good to hear more economists talking about the foolishness of austerity in Europe and the United States. Some, including Joe Stiglitz and Paul Krugman, have been saying it for a long time, but the chorus has gotten louder recently. Still, I have yet to hear anyone put the argument in terms simple enough for the average citizen (including the average Republican not too tied in ideological knots) to understand. I’d therefore like to take a shot.

To reignite the economy, we need more people to buy things. For that to happen, we need to keep people in their present jobs, re-employ people who have lost jobs, and employ those just entering the job market. Once people are buying things, those who make the goods and services being bought will have reason to invest, hiring new workers and buying new machines that make things. They have no reason to invest now; there is no likely return on their investment.

Republicans have things backwards. They assume that investors will invest if we give them more money. But they already have lots of money. Why assume that giving them more will change their behavior? They’re not stupid (at least most of them aren’t). What they need is a prospect of profit.

Tax breaks aren’t any incentive. What good are lower taxes on income that you don’t have? What’s the point of hiring another worker if he or she will have nothing to do? Fewer regulations are equally irrelevant. This is why “uncertainty” and “confidence” (the claim that investors won’t invest because they are uncertain what their taxes might be in the future or what new regulations they may face) are smokescreens.

What do you suppose investors would do if there were customers pouring through their doors? If goods and services were in demand and inventory was disappearing? They would not say, “No, I don’t think I’ll take advantage of this. I’ll forgo making a profit now because I don’t know what my taxes and regulations will be next year.”  More likely, the response would be, “Wow, we can sell more widgets now; let’s crank up production!”

In the language of economists, this is a demand-side problem, not a supply-side problem. Republicans have been looking at the world through supply-side lenses for over 30 years and can’t see the total economy. They are blind to common sense.

So how do we get people to buy things? We can save good middle class jobs by aiding states so they can stop laying off teachers, police officers, firefighters, and other public workers. We can create new jobs with large infrastructure projects. There are so many things on the landscape in need of repair or replacement that it shouldn’t be hard to employ or re-employ millions of people. In 1933, the Civil Works Administration (CWA) put 4 million people to work in two months.

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  • Philip Hughes

    On the face of it you theory sounds good: provide more public jobs, put people back to work, so that they will spend more money thus giving greater incentive to the private sector to hire more people.

    However the WS Occupiers would not agree. They want GOOD PAYING JOBS…Recently several of them were offered entry level jobs by the private sector but they turned the job offers down “I need to make at least 80k/year”, they said. Different times now: people want things handed to them, they don’t want to work for them.

    • rustacus21

      Again, we shouldn’t be distracted by irrelavancies; not that it’s meaningless, but it’s about the sum total of ALL money circulating in the whole of the economy that is of greater impact. The private sector isn’t the only employer we should also acknowledge! Government being in the ‘economic game’, has it’s benefits & is THE best barometer of how the private sector is performing, by way of direct incentives enticing the private sector to compete for dollars flowing thru the economy as well. But in the simplest terms, which would a business owner prefer: 1 shopper w/$400 dollars or 400 shoppers w/$1? Undoubtedly, those 400 will bring a few others & now we’re working in greater multiples. Shoppers as well, provide critical ‘free’ word-of-mouth advertising, in the meantime. It doesn’t matter if they’re ‘public’ or ‘private’ sector dollars – they all SPEND equally!!! THIS is the true beauty of vision, virtue & the Liberal/Progressive imperative, which has the citizen at its core: the level of economic activity at the Middle class level can’t be disputed, especially taking into consideration the period of 1994-2000 as a most recent indicator. We all know who was @the helm during that time, by the way…

      • wayneonly

        Rustacus, I’m glad you mentioned who was at the helm in 1994-2000. Clinton was a good President in many ways, but there is one very big blight during his administration. No, not the sex scandal. It is the repeal of provisions of the Glass-Steagall Act, thus allowing banks to start investing in risky and speculative bonds and sub prime mortgages, using depositor monies. That led to the “Too Big to Fail” banks getting greedy and bringing our monetary system to near collapse. This caused our government (us taxpayers) to have to bail them out , which caused the housing market to collapse and the recession of 2008 (which we are still not our of yet). And if we don’t correct the problem of the “Too Big to Fail” banks, we will have to do it all over again. Restore Glass-Steagall and break up the banks like we did to AT&T.

    • karlaw55

      Don’t paint everyone with that brush. I’m sure there were other people in the group who would have taken those jobs.

    • JSquercia

      I am NOT so sure that the tale you are telling is true but even if it were the anecdotal evidence of several individuals hardly is cause for your statement about people not wanting to work for things. It would seem to me only to serve to “validate” your already pre-existing prejudices.
      What has happened in Europe is PROOF that AUSTERITY doesn’t WORK. England now admits that they are in a double dip Recession

    • duhsciple

      What are the names of the people and what were the specific jobs they were offered?

    • ralphkr

      Well, Mr. Hughes, I must say that times do change. Since you have not stated what type of jobs were offered (other than entry level), the wages offered, nor what the WSO people’s circumstances were I am unable to ascertain just what their problem was but I can certainly imagine myself refusing a job because it does not pay enough to cover my expenses. When I was asked in high school what I considered a possibly attainable income I might get I answered that my dream was to someday earn $100 a week. Of course, $100 then would be more than $1,000 now. Looking at what many college grads owe (six figures) I can see why they would need to make $80K per year just to be able to survive and they certainly could not settle for some entry level job paying $20K (or less) per year. Personally, I must say that I have NEVER met any one who did not want a GOOD PAYING JOBS and if anyone would tell me that they want a POOR paying job I would seriously consider that they were mentally challenged (and I have noticed that “entry level jobs” are invariable just around poverty level or less).

  • Demand is indeed the driver. I worked in the corporate world for over four decades and demand and how to achieve more demand for our products topped the list of concerns. Perhaps during that time in a mere handful of meetings we discussed the need for tax cuts to improve our bottom line. I’m sure taxes must have come up, but I can’t recall the conversations. In fact I can’t recall ever meeting a businessman who would not trade a little tax increase for a whole bunch of new demand for products and services.

    • Jobs=Economy are not the GOP’s objective, their main goal is Obama

    • RodgerMitchell

      The federal government can increase demand without increasing taxes one cent. Taxes do not pay for federal spending.

      Time to learn the difference between Monetary Sovereignty and monetary non-sovereignty.

      • I’ve read some of your website postings regarding your views. At first glance it sound like a game of semantics, but is even more esoteric. It seems to boil down to just print more money and presto chango all problems are solved. If taxes do not pay for federal spending just what purpose do they serve and what is happening to the revenue collected?

        • RodgerMitchell

          Good questions.

          We became Monetarily Sovereign on August 15, 1971. Before then, taxes did support federal spending. Today, both federal taxes and federal borrowing no longer support federal spending.

          After that date, taxes have served only two purposes, both of which are doubtful.
          1. Taxes force people to accept dollars. (However, federal taxes aren’t needed. There are plenty of state an local taxes for that purpose.

          2. Taxes can be used to cure inflation. (However, in reality, taxes are too slow, too political and not incremental enough to do the job. Rather than cutting the money supply with taxes, the Fed successfully prevents inflation by increasing the value of money. It increases interest rates.

          Rodger Malcolm Mitchell

    • Kevin Schmidt

      Agreed. America’s most prosperous times were also our most heavily taxed times.

      Besides, lowering taxes will not work when big business and the upper 1% are already sitting on billions of dollars. To solve the problem, we should enact a tax on excess cash in the bank. Anything over $500,000 should be taxed at 15%, or higher.

  • rustacus21

    … & so the question is, does it surprise any 1 that YES, Republicans have things backwards? Again & again?! Besides their dyslexia, which as commonly commonly often causes them to ‘mis-read’ the Constitution, it is therefore understandable that they confuse the results of tax cuts for the Middle Class & those for the wealthy. Stubbornly, they (& their voter base) hold on to the fantasy that ‘prosperity is just around the corner’, as they’ve been waiting for the ‘rich/corporations-only’ tax-cuts to work their magic. 11 straight years of getting the same results, from the same mad science experiment. But what’s the word I’m looking for – describing a person (or large group thereof) who do the same thing, over & over & over & each time, expecting to get a different result from what they continue getting over & over & over? I believe we of better judgment know the answer all too well, considering the 2001-2009 ‘results’…

    • Kevin Schmidt

      Don’t just blame the Republicans. The Democrats had full control of the White House and Congress too. All they did was continue on with the same fascist agenda as the Republicans. Only the political studio wrestling wedge issues differed.

      As long as you blame ONLY the Fascist Republicans or ONLY the Fascist Democrats, then you too are part of the fascist problem.

      • Dan

        calling names dosen’t work when no one has control without 60 votes in the senate that’s a fact

        • Kevin Schmidt

          Calling a fascist a fascist is not name calling, it is truth telling.

          The Democrats could end the filibuster any time they want with 51 votes. That’s a fact!

          • Only if they are allowed to bring it up for a final. The minority can keep the 60 vote level to stop such a vote. The only time rules can be changed is at the beginning of the new congress, which will be next Jan.

          • gendotte

            No they can’t. At least not until the start of a session. I don’t think that anyone could have foreseen the abuse of the filibuster that has happened in the last two years.

      • gendotte

        NO THEY DID NOT! The way things are, one Senator can gum up the works. It takes a super majority in the Senate to pass anything, and as long as the filibuster is all powerful that is the way it is going to be. The Dems can do nothing at all as long as this is the case. It is a miracle that Obama can get any of his program passed as long as there are not 60 non-Blue Dog Democrats in the Senate. Just look at the Treasury Department, and judicial nominations for a good example of GOP obstructionism.

  • horanel

    Thanks for the common sense. But lets not forget to change the laws that allow banks and corporations to sell middle class assets off as scrap — that seems to be a big part of the problem.

  • dmikee

    Just do it! And simply cut the wasteful $642 billion defense budget to do it. We could certainly forego a few aircraft and ships and bases to build schools, highways, and other public infrastructure. This is a no-brainer unless one is hoarding capital waiting for another casino bet.

    • RodgerMitchell

      That “wasteful” $642 billion defense budget adds $642 billion to the economy, supporting thousands of jobs all over the nation — and it doesn’t cost you one cent. That’s right, your taxes don’t pay for federal spending.

      Learn the difference between a Monetarily Sovereign government and a monetarily non-sovereign government.

      • Kevin Schmidt

        Congratulations! You win the award for making the most ridiculous comment of the year!

        “…your taxes don’t pay for federal spending.”
        Really? Then what does pay for federal spending? Oh, that’s right, deficit spending on nonproductive endeavors.

        You’re trying to claim that a profit is being made from the production of WMDs, and that profit is what is funding the $642 billion defense budget. If that were true, then why do we have to pay the $642 billion in the first place? And again next year, and the year after that, and so on.

        The problem with jobs created by military spending is that those jobs create destruction and not production. If the jobs produced plowshares, those plowshares could be used by farmers to grow more produce. More produce means more food for everyone, and lower prices too.

        But when the jobs beat plowshares into swords, then all that can come from it is death and destruction, not to mention a shortage of food with an increase in prices.

        With limited resources, all that can be produced is guns or butter. You can’t have both. Learn the difference between Econ 101 and obvious chickenhawk war mongering propaganda.

        • RodgerMitchell

          You hate war. I hate war.

          Now that we have that resolved, let’s get back to economics. Taxes do not pay for federal spending, simply because the federal government (unlike state and local governments) is Monetarily Sovereign.

          You and I also are monetarily non-sovereign. We spend by transferring dollars (from our checking account to someone else’s checking account.

          The federal government creates dollars by spending. Say you receive social security benefits. The government does not send dollars to your bank. The government sends instructions to your bank, telling your bank to increase the numbers in your checking account.

          At that instant, not only do you have more money, but so does the economy, as you are part of the economy.

          This process has nothing to do with taxes. The government can send these instructions forever, and your bank will obey.

          • Kevin Schmidt

            You don’t know what you are talking about! The government cannot just create more money out of thin air and not expect there to be inflation. Especially if they spend it unwisely on nonproductive purposes such as the defense budget.

            Also, Social Security is paid for by us, not by the government.

            You falsely claimed the defense budget is “supporting thousands of jobs all over the nation — and it doesn’t cost you one cent.”

            Besides completely ignoring the fact that hundreds of billions of tax dollars pay for defense spending, here is further proof that you are completely wrong:

            ‘…the crucial question is not how many jobs are created by spending, for example, $1 billion on the military. Rather, it is whether spending that $1 billion creates more or fewer jobs when compared with spending $1 billion on alternative public purposes, such as education, healthcare and the green economy—or having consumers spend that same amount of money in any way they choose.

            In fact, compared with these alternative uses, spending on the military is a poor source of job creation. …$1 billion in spending on the military will generate about 11,200 jobs within the US economy. That same $1 billion would create 16,800 jobs through clean energy investments, 17,200 jobs within the healthcare sector or 26,700 jobs through support of education. That is, investments in clean energy, healthcare and education will produce between 50 and 140 percent more jobs than if the same money were spent by the Pentagon. Just giving the money to households to consume as they choose would generate 15,100 jobs, 35 percent more than military spending.’

            truth-out D O T O R G /news/item/9215-dont-buy-the-spin-how-cutting-the-pentagons-budget-could-boost-the-economy

            Left out of the study are all the extra benefits from safe, clean green energy, better healthcare and better, less costly education. What extra benefits do we get from producing more WMDs? Inflation, deficits, crumbling infrastructure, misery, poverty, death and destruction.

            Case closed!

          • RodgerMitchell

            Your “proof” made my point.

            I said, defense spending supports thousands of jobs. Your proof said, ” . . . whether spending that $1 billion creates more or fewer jobs when compared with spending $1 billion on alternative public purposes

            I have no argument about what kind of spending supports the most jobs, just that spending supports jobs.

            Further, if you understood the difference between a Monetarily Sovereign government and a monetarily non-sovereign government, you would understand that in the former, taxes do not pay for government spending, while in the later, taxes do pay for government spending.

            But first you have to learn the difference between the two kinds of government. I can direct you to sites if you wish to learn.

          • ” Especially if they spend it unwisely on nonproductive purposes such as the defense budget. ”

            Money spent on defense of this country is not about creating jobs. You call the money spent on stopping Hitler and Imperial Japan from rampaging across the world or holding the USSR in check ” nonproductive”. Get real, none of the things you tout as good alternatives to military spending would be possible without a country to enjoy them in.

        • Part of the Governments job is defending Americans. The Enemies of this country are real, as is their hatred of the American way. This costs money. Admittedly some of the things we spend money on in defense of this country are unnecessary, but I for one would rather have too much than not enough. Our Enemies are out there just waiting and hoping that Americans will start listening to people like you and began cutting back on Americas defense, then they will move in for the Kill.

      • dmikee

        Say what? was that a Yogi-ism? The beneficiaries are the bribed officials in the Arab states and all over the world as well as the arms contractors who are redepositing their ill gotten profits into Swiss banks and off shore accounts. That $642 billion certainly buys us nothing but grief. It could buy an enormous amount of public infrastructure and good paying middle class jobs.

        • RodgerMitchell

          So you’re saying the money could be better spent elsewhere? Agreed. My point was that federal spending stimulates the economy. Period. I agree, some spending is “better” than other spending.

        • RodgerMitchell

          So you’re saying the $642 billion went overseas, not to American workers in the defense industry? You do have proof of that, right?

      • Grandpa_In_The_East

        So you are a Republican, then? Please tell us the difference between a monetarily sovereign government and a monetarily non-sovereign government. OK? And give us your thoughts on how we can best use that information.


        • RodgerMitchell

          Grandpa, I’ve tried to send you a link to Monetary Sovereignty, but I’m not sure this site approves such links. Let me know whether you see it.

          • Grandpa_In_The_East

            Naaah, the link was blocked. I’ll try googling the topic. Thanks for bringing it up.


      • Great argument for inflation and debt! Let’s eat this meal, the kids will pay!

        • RodgerMitchell

          Contrary to popular myth, there has been zero connection between federal deficit spending and inflation. You can see the evidence for this at fica (dot) com.

  • I keep telling people that the 99% control the economy, it only makes sense. What happens when “the people” bad together to boycott a large company for something it’s done. They back down. Its happened over and over again. Without us buying new clothes, foods, cars, kitchen appliances and the many other things we purchase everyday businesses will close. The one percent cannot maintain this economy and they know it. The purse strings of the nation are in the pocket books of the 99%, one day of no spending by everyone in the 99% would leave the corporations shivering and hiding in the corner. Imagine a week of it.

    • Grandpa_In_The_East

      What I have found is that about 1/3 of the 99% are extremely vocal lackeys of the 1%. On your computer go to the Website of a moderately large-city newspaper. Read the comments below the articles such as banking, the upcoming election, the economy, etc.
      You fill find these Republican robotic imbeciles have plenty of sound advice, or so they think: “get a job, quit whinning for handouts, etc, etc, etc. Less than 1% OF 1% of the 99% are really active in the Occupy movement. We have many sympathizers, but few who are vocal. Help us out in any way you can.


  • RodgerMitchell

    Nice try, Mr. Leighninger, but unfortunately, you do not understand the differences between Monetary Sovereignty and monetary non-sovereignty. That’s why you said, ” . . . deficits are worth worrying about. ”

    No, for a Monetarily Sovereign government, deficits are not worth worrying about. Deficits merely are an accounting of the dollars the federal government adds to the economy in any one year.

    A federal deficit is an economic credit and vice versa. Federal deficits are necessary for economic growth. Federal deficits cost our government nothing, but economic credits are valuable to the economy. When we fail to run federal deficits, we have depressions:

    1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
    1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
    1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
    1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
    1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
    1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.

    Before you write another article, please, please, please learn the differences between Monetary Sovereignty and monetary non-sovereignty.

    Rodger Malcolm Mitchell

    • wayneonly

      Rodger, so what you’re saying is exactly what the text of the article is saying. We (U.S.) cannot cut our way out of this recession, we need to spend our way out. I disagree to a certain extent. We need to spend WISELY to get out of the recession without making the deficit grow to the extent that it is unmanageable. With that said, what is spending wisely? It is investing in OUR economy. Let Europe and Asia worry about their economy, we need to worry about OUR economy. That means we invest money in education, infrastructure, and business in the U.S., not the multinational conglomerates or foreign governments that use our money for their own corruption or terrorism. We need to put people back to work in America so they can buy products made in America and pay taxes in America.

      We have spent far too much money and lost far too many lives trying to be the “policeman” of the world and buy the affections of nations who will always hate us for our arrogance in believing we are “better’ and “righter” than they are. It is time we realize that we will be a stronger nation with a stronger economy if we take care of our business than we will be if we keep sticking our noses where they are not wanted and getting our nose busted over and over again. So cut the defense budget and invest in America’s education, health, infrastructure, and safety (police and firefighters). Bring the buyer back and you will bring the seller back.

  • Burned my plastic,closed bank account,buy at thrift store, It sucks too! but you know if only half the people would do it, Corporations and big industry would begin to get the message!

    • I have been trying to do the same. I do not feel comfortable about closing the bank account,but have laid off the credit cards and love shopping at thrift stores. They have a lot of nice stiff ! Good Will has a lot of nice stuff ! ! !

  • Dan

    So when clinton raised taxes cut spending the economy boomed then having a potential surplus we lower taxes raised the debt and lost jobs how?

  • bohunkus

    Austerity is for the poor. There is no profit in it for the rich. Besides, they aren’t used to that. It is cruel. It would really hurt!

  • rblevy

    The trouble is that as the years pass, memories dim and those workers who benefited from the Great Depression programs like the Works Project Administration are almost completely gone, and their children are likewise beginning to die out. Soon their experiences and Glass-Steagall will be little more than references in history books to which no one pays attention anyway.

    F**k the Rethuglicans. Supply side economics hasn’t worked. We need to bring back Keynesian economics and we need to do it now.

  • Nicoboy

    There is a limit to how much you can cut. Cuts do not create wealth or growth, at best they may yield some savings (at times with a price somewhere else). It is by creating jobs that demand growth and with it supply will follow = growth and more jobs. Inflation can be a by product that can be dealt with once people and government are not struggling. To start with, why don’t the cut fans start by saying no to the 1.5 trillion dollars the new air fighter will cost and put those resources where they can and will create more jobs, employment, demand and therefore supply of goods. As far as I know few people will demand a jet fighter, but all will need food, housing, education, health services, roads, trains, etc. etc. etc. A much better way to spend tax payers money for the benefit of all. It is really that easy when you are not tide up with other interests and fear mongering.

    • ObozoMustGo

      Hey Nico…. when you say “cuts do not create wealth or growth”, you are correct. They restore it. Government taking resources from the private sector for your social engineering games is a NET DRAIN on the private economy. Allowing people to keep more of THEIR OWN earnings is NOT a net drain on the economy, but yeilds positive effects by increasing liquidity in the markets and the velocity of money.

      By the way, how can a dummy like you say that spending on fighter jets is NOT spending that goes to engineers and scientists and programmers and welders and workers that build those things that we defend our country with? The only reason you can say that is because you’re a leftist nutjob moron, that’s how! Defense is the NUMBER ONE responsibility of the Federal Government. It’s NOT the job of the Fed to take earnings from one group and redistribute it amongst others who did not earn it. Unless of course, you support a leftist and socialist agenda that is outside of Constitutional limitations on Federal power.

      Have a nice day!

  • ObozoMustGo

    Someone should tell Greece that budget deficits dont matter. Only in leftist nutjob world does this sort of thinking garner any support. The vast majority of Americans have enough sense in their heads to know that a national debt of $16T, and growing quickly, compared to a GDP of $15T and barely growing, is a serious threat to our financial stability and ultimately to our sovereignty. It doesnt pass the smell test. Sorry! That’s why we reject it.

    By the way, if confiscated 100% of the wealth of the Forbes 400, every last stinking penny, we could NOT run our government for even 6 months. If we confiscated all the wealth of all the millionaires and billionaires, we could barely run the government for 1 year. What do you do after that? So all this “get the rich”, class warfare, and Occupy bullsheet is nothing more than a feeble attempt for Obozo to stir up his base of useful idiots that write for The Memo and all the other trash rags out there, including ABC, CBS, NBC, CNN, and MSLSD.

    Have a nice day!

  • The less money that a government spends, the more money that it’s people get to keep!

  • If we cut out Home land Security and TSA which were added and never paid for It would go a long way towards paying our debts off. These programs were the biggest expansion of government in recent history they add to the debt and no new funds were ever added to pay for these new employees.