Republicans: The economy will recover if we put less money into it

John Boehner, today:

I think we can help our economy by extending our spending freeze until September.

Yeah, that is a fantastic idea. Brilliant, genius. I’m not an economist; I didn’t take a single econ class in college. But I know that during a recession, companies lay off people and/or close, rendering their employees unemployed, and without a lot of money. So those people stop buying things, causing other companies to lay off people and/or close, rendering more employees unemployed, and those people stop buying things… you get the point. This is obvious. A severe recession leads to a big shortfall in demand – there are plenty of things to buy, but fewer candidates with dollars available to buy those things. And it doesn’t get more simple than this: when lots of things are being bought, the economy grows; when few things are being bought, the economy shrinks. So a demand shortfall does further damage to the economy. Today, with the extreme tightening of credit, nobody, and I mean nobody, has the money to step in and make up for the demand shortfall, except the federal government. This is the whole point of the economic stimulus bill.

What’s more, this has happened before! In the beginning of the Great Depression, Pres. Herbert Hoover decided to tighten the belt of the federal government, and avoid spending. The economy, you may remember from your history textboook, continued to plummet. When FDR was elected, he decided to embark on massive government spending (including WWII), and although he ran up huge deficits, the economy recovered. This is part of the reason why everyone thinks Herbert Hoover is one of the worst presidents ever, and FDR one of the best. But the Republicans continue to push an idea that has failed in the past, as if somehow it’s going to work today. It makes no sense.

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One thought on “Republicans: The economy will recover if we put less money into it

  1. george brett says:

    don’t some economists attribute the recovery from the great depression almost entirely to WWII rather than the spending projects he implemented leading up to the war?

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