It’s the Economy Stupid, (On the Demand Side)


Some of my commenters have been saying we are stuck in this recession due to the President’s anti-business policies; claiming it is causing uncertainty in the business world. The problem is businesses are actually doing ok right now, the problem lies on the demand side.

Both business confidence and the stock market are back to pre-recession levels; what about consumer confidence…

Well it is still devastatingly low. The recession is not being driven by uncertainty among businesses.  The recession is being driven by a lack of confidence on the demand side. So how do you solve a lack of demand?  As Keynes has said all along, low aggregate demand can be spurred on by government spending.

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6 thoughts on “It’s the Economy Stupid, (On the Demand Side)

  1. Ok so we have spent and spent and spent. According to the Keynes – is it now time to stop?

    Please stop – our debt is out of control. All I see are taxes rising to pay back all this debt.

    Oh but that is how we increase growth by increasing taxes which allows the government to spend more to create demand. I think I understand the circle.

    We pay taxes, the government spends until it needs more taxes. Then we raise taxes more and the government continues to spend to create even more demand. Then we repeat the cycle and keep raising taxes to feed the government beast. Sounds like the Government makes all the decisions eventually and owns all our assets. Everyone works for the Government.

    Why does the left always feel a few people in the government know better then the private sector on how to invest?

    Please get out of the way and let the private sector do what it does best and create wealth opportunities for all people not just the people who are the friends of the government officials thru campaign donations.

    • Keynes advocated spending until the economy is back to normal and then government should get out. That is why back when stimulus packages by both bush and obama were being passed Keynesian economists said it should actually be more.

      But your point that we need to let business do their thing to solve this recession just doesn’t match up with facts. Businesses are doing okay yet we still have high unemployment. So it’s not that government thinks it is better at investing than the private sector it is that businesses are not driving up demand.

      You are confusing government spending with socialism and communism. Keynesian economics is not socialism. Keynes says government can boost demand, which historically has shown to be true. Then once demand reaches normal levels government should step out of the way. At no point does Keynes or the Democrats advocate owning all our assets. This sounds like a Hayekian “Road to Serfdom’ argument, which no one believes could happen in America.

      Finally, the post was merely pointing out that conservatives claim there is uncertainty in market which is causing slow growth in business. The fact is though that businesses are doing okay, Republicans need to stop using that talking point.

  2. Ok so by your own account businesses are doing well. So we are back to normal. Then why does Obama’s recent budget not reflect that thinking. He still is spend, spend, spend but he knows it will never pass because Reid said he will not vote on it. So Obama can just use it as a stump speach.

    Give a few people this kind of power and they don’t know when to stop. You are also giving them the ability to pick winners and losers like Obama did with all the Environmental Companies that are now going backrupt because they had bad business models. Now who is investing in risky ventures.

    This is also an easy way for Washington Politicians to take our tax money and reward their campaign doners so the campaign money keeps coming in the future. It is a sick system. I would put my money in the private sector to invest rather then let a few people with no business experience (most of Obama’s adminstration came out of academia) invest our money.

    We already have Serfdom. We in the private sector work our butts off. The government takes our money and they give it to their friends to “create demand”. Then their friends give the money back politicians who then rewards them again. Then they claim they need more money and raise our taxes again because we need to reduce the deficit.

    You have it backwards. Demand is down because there is uncertainty. People are not spending (i.e. creating demand) because they don’t know they will have a job next week because Obama has no long term economic policy other the to spend. People don’t know what taxes they will owe next year because no tax policy from Obama is permenant. He won’t make the Bush tax cuts permenant and the payroll tax was extended for only 10 months. So now we have to wait until the November elections to get any kind of certainty on tax policy. So people are just holding back on spending. If the Dems would but a long term plan together (i.e. a budget) it would create certainty and people would start to spend again.

    Keynes theory might sound good in a classroom but it doesn’t work in the real business world or without a real budget or plan.

    • Let’s just look at the facts. Business confidence and the stock market are back to pre-recession levels – fact. Consumer confidence is not back to pre-recession levels – fact. Therefore businesses have been doing better than consumers – fact. Consumer confidence began to rise in 2009 – fact. This correlates with the Obama stimulus package – fact. Economists said the stimulus package should have been larger – fact. So not all that surprising that the stimulus package increased consumer confidence a little but not enough. So is it really that outrageous to believe more government spending might pick the economy up on the demand side?
      Sent via BlackBerry from T-Mobile

  3. Again consumer confidence is down because of the uncertainty of no economic plan. People are hoarding their money out of fear they will be left without a job or their taxes will go up – or both.

    I could find an equal number of Economists who would would say the opposite – that the stimulas held back our recovery and that we would be doing much better if we unleased the power of the private sector and not rely on central control out of Washington that picks winners and losers and funnels money to friends of the party.

    Is it really that outrageous to think that all this debt won’t someday be a major long term problem? Spending our way out of jam is a risky strategy, is not sustainable and flawed with curruption.

  4. Pingback: The Bush Tax Cuts Are Just Bad Policy | Ajones1021's Blog

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