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This reinforces a truth that many fiscal conservatives are either ignorant of or choose to ignore. If the government spends a dollar, it does not disappear. I

This reinforces a truth that many fiscal conservatives are either ignorant of or choose to ignore. If the government spends a dollar, it does not disappear. It is paid to someone. They pay taxes on it. And then they spend it. And that person pays taxes on it. And so on and so forth. (excluding payments that go out to foreign entities) Government spending isn't a drain. It is another piston in the financial engine. It also happens to be one of the most reliable and most pliable pistons in the engine. You can think of the government as Herouku. Most of the time you're going to want to run as few instances as possible. When you make the front page of hackernews, you either need to jack up the instances or your site crashes. We're drawing our lines in the wrong places. Some government spending is good. In some cases, massive government spending is good. A lot of the time the private markets do a better job. Sometimes they don't. Paying food stamps is a great way to reduce crime and bolster the stability of your country. If you ignore the root causes you get long term issues. We need to fix the underlying problem and keep paying for food stamps. You can do both at the same time.

barney54 15y ago
You are forgetting that tax dollars have to come from somewhere. the money has to be taken from one group of people or financed. Those activities are not costless. This is one of the reason why other studies find that reducing government spending stimulates growth (some of those studies are described here: http://mercatus.org/publication/does-government-spending-affect-economic-growth http://mercatus.org/publication/does-government-spending-aff...)
- fennecfoxen 15y ago
  My objection is that all too often you see the attitude that because some baseline level of government spending is good and profits the economy (and society), that Program XYZ I Just Proposed For Widows And Orphans[tm] is also good. And most fiscal conservatives have better things to conserve than food stamps. Let's talk about where the money really goes. Oh, wait, white elephant in the room.
- nerfhammer 15y ago
  http://www.sourcewatch.org/index.php?title=Mercatus_Center http://www.sourcewatch.org/index.php?title=Mercatus_Center
- vannevar 15y ago
  The article you cite actually makes the same observation that there isn't a consensus: This lack of consensus in the empirical findings indicates the inherent difficulties with measuring such correlations [between government spending and GDP] in a complex economy.
bdunbar 15y ago
Paying food stamps is a great way to reduce crime and bolster the stability of your country. You (mostly) had me up to the first point. How are food stamps a positive / negative on crime?
- ssharp 15y ago
  Just a guess, but a hypothesis might be that people who are unable to provide food/shelter/necessities for themselves through legal channels, will be more likely to use illegal channels if an adequate welfare system is not in place. I think this hypothesis has sociological and psychological merit, and I'm sure its been tested before, though I don't know of any studies off-hand.
- freehunter 15y ago
  Without any numbers to back it up, I can think of a couple reasons why it might. When you're poor, you feel helpless. If you don't have money to feed your family, you have to get money or goods. Taking that weight off the minds of the poor keeps them free to pursue more productive activities. Obviously that's conjecture, and all poor people aren't criminals (and all criminals are not poor), but it's not a leap of logic to say poverty can lead normally straight people to mentally justify committing a crime. Welfare programs can and do help people get back on their feet.
  - electrongrande 15y ago
    That's also conjecture. Not all people on welfare programs "get back on their feet."
    - freehunter 15y ago
      Well I didn't say all, and I didn't say welfare programs get people back on their feet. I said it helps people get back on their feet. Living in Michigan, almost all of my family became unemployed as a result of the factories closing down. Some took the assistance to get retraining and find another job, and some took maintaining the assistance as their new job or as a retirement package. Some just weren't able to get back into the job market no matter how they tried. I got out of my state's "No Worker Left Behind" retraining assistance just before the new governor shut down the incredibly successful program. It's a combination of willingness to work and ability to work. Welfare programs can do no more than take basic survival off your "worries" list.
NoPiece 15y ago
That is a just an ad hominem attack - of course fiscal conservatives (and classical economists, austrian economists, monetarists) aren't ignorant of the Keynesian multiplier, they just don't agree that it is true. The best research I have seen shows that the multiplier is closer to .6, so this kind of government spending is useful to prevent starvation, but not at all good for the economy. Here is a good summary of the research that was published by the authors in the wall street journal: http://online.wsj.com/article/SB10001424052748704471504574440723298786310.html http://online.wsj.com/article/SB1000142405274870447150457444...
brg 15y ago
It depends where the dollar comes from. If the dollar is from taxes, it not only destroys the dollar but nearly two others along with it. If the dollar is from borrowing, the result is better. But if the dollar is in the form of tax cuts, then it ends up creating more good than bad. As I've quoted elsewhere, this is from the study by Romer and Romer. http://elsa.berkeley.edu/~cromer/RomerDraft307.pdf http://elsa.berkeley.edu/~cromer/RomerDraft307.pdf http://elsa.berkeley.edu/~cromer/RomerDraft307.pdf http://elsa.berkeley.edu/~cromer/RomerDraft307.pdf

barney54 15y ago

You are forgetting that tax dollars have to come from somewhere. the money has to be taken from one group of people or financed. Those activities are not costless. This is one of the reason why other studies find that reducing government spending stimulates growth (some of those studies are described here: http://mercatus.org/publication/does-government-spending-affect-economic-growth http://mercatus.org/publication/does-government-spending-aff...)

fennecfoxen 15y ago
My objection is that all too often you see the attitude that because some baseline level of government spending is good and profits the economy (and society), that Program XYZ I Just Proposed For Widows And Orphans[tm] is also good. And most fiscal conservatives have better things to conserve than food stamps. Let's talk about where the money really goes. Oh, wait, white elephant in the room.
nerfhammer 15y ago
http://www.sourcewatch.org/index.php?title=Mercatus_Center http://www.sourcewatch.org/index.php?title=Mercatus_Center
vannevar 15y ago
The article you cite actually makes the same observation that there isn't a consensus: This lack of consensus in the empirical findings indicates the inherent difficulties with measuring such correlations [between government spending and GDP] in a complex economy.

bdunbar 15y ago

Paying food stamps is a great way to reduce crime and bolster the stability of your country. You (mostly) had me up to the first point. How are food stamps a positive / negative on crime?

ssharp 15y ago
Just a guess, but a hypothesis might be that people who are unable to provide food/shelter/necessities for themselves through legal channels, will be more likely to use illegal channels if an adequate welfare system is not in place. I think this hypothesis has sociological and psychological merit, and I'm sure its been tested before, though I don't know of any studies off-hand.
freehunter 15y ago
Without any numbers to back it up, I can think of a couple reasons why it might. When you're poor, you feel helpless. If you don't have money to feed your family, you have to get money or goods. Taking that weight off the minds of the poor keeps them free to pursue more productive activities. Obviously that's conjecture, and all poor people aren't criminals (and all criminals are not poor), but it's not a leap of logic to say poverty can lead normally straight people to mentally justify committing a crime. Welfare programs can and do help people get back on their feet.
- electrongrande 15y ago
  That's also conjecture. Not all people on welfare programs "get back on their feet."
  - freehunter 15y ago
    Well I didn't say all, and I didn't say welfare programs get people back on their feet. I said it helps people get back on their feet. Living in Michigan, almost all of my family became unemployed as a result of the factories closing down. Some took the assistance to get retraining and find another job, and some took maintaining the assistance as their new job or as a retirement package. Some just weren't able to get back into the job market no matter how they tried. I got out of my state's "No Worker Left Behind" retraining assistance just before the new governor shut down the incredibly successful program. It's a combination of willingness to work and ability to work. Welfare programs can do no more than take basic survival off your "worries" list.

NoPiece 15y ago

That is a just an ad hominem attack - of course fiscal conservatives (and classical economists, austrian economists, monetarists) aren't ignorant of the Keynesian multiplier, they just don't agree that it is true. The best research I have seen shows that the multiplier is closer to .6, so this kind of government spending is useful to prevent starvation, but not at all good for the economy. Here is a good summary of the research that was published by the authors in the wall street journal: http://online.wsj.com/article/SB10001424052748704471504574440723298786310.html http://online.wsj.com/article/SB1000142405274870447150457444...

brg 15y ago

It depends where the dollar comes from. If the dollar is from taxes, it not only destroys the dollar but nearly two others along with it. If the dollar is from borrowing, the result is better. But if the dollar is in the form of tax cuts, then it ends up creating more good than bad. As I've quoted elsewhere, this is from the study by Romer and Romer. http://elsa.berkeley.edu/~cromer/RomerDraft307.pdf http://elsa.berkeley.edu/~cromer/RomerDraft307.pdf http://elsa.berkeley.edu/~cromer/RomerDraft307.pdf http://elsa.berkeley.edu/~cromer/RomerDraft307.pdf