(08-17-2011, 11:48 AM)TVs Luca link Wrote: [ -> ][quote author=EarthlingJohn link=topic=5864.msg219242#msg219242 date=1313557313]
The US government spends more money on welfare than education. Â I think we spend near 1 trillion on Military as well. And people complain about money being put into NASA.
I don't want to live on this planet continent anymore.
The worst part is the right-wingers screaming bloody murder over anything that would actually help the budget. Like....cutting military spending for example. And promoting tax cuts for so-called "job creators" who do fuck all to help the economy.
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Job creation is spurred by creating demand, lets say you as a government entity want to get the economy moving, your economy consists of a company that makes wigits and citizens that buy wigits.
You want the wigit maker to make more and hire more citizens to build wigits. You have two choices:
1 - Give the company money
2 - Give the citizens money
You can call "give money" whatever you want, be it a tax break or a welfare check, either way the government spends money (or takes in less revenue) the result is the same.
If the company makes and sells 1000 wigits, and you give them money, they're going to sit on it, given the economy is slow they don't need to hire anyone. If they make 1200 wigits and hire a new person they've got a surplus of 200 wigits sitting around doing nothing. Hypothetically here you would say that the new hire(s) would buy those extra 200 wigits and you'd be square, let's assume that. So you at least achieve part of your desire, production goes up, some people get hired.
Now lets say you give money to the citizens, they in turn can now buy more wigits. The resulting increase in demand prompts the company to hire a new person to fill orders, that person now with a job can also buy more wigits. Hopefully this would begin a cycle where the company hires new people to fill new orders to meet a growing demand, the result has also been achieved.
But there's a few variables here that are missed, to whom in the populous do you give money, rich citizens to invest in more wigits, the poor?
How many wigits was one consuming before they got the subsidy? What is the limit of consumption, where do you stop gaining any additional utility?
What if the company gets the extra money and decides just to sit on it, why boost production when you are unsure of demand?
The general argument from supply side IMO breaks down when you get companies that sit on the money. Which is happening right now, unsure of future demand they sit on piles of cash unwilling to spend it since they don't know if they'll get anything out of it, even if they all started spending their money in a hiring spree it would bring unemployment down and spur growth.
If you work the demand side, especially on the poorer end, you're more likely to see returns on that investment. If a poor family couldn't buy any wigits before and they wanted to, now they can. The higher the income bracket the less the return, the most rich citizens likely can already afford to have all the wigits they want, giving them an extra dollar won't increase their consumption at all.
This is a really simplistic model but it should put things into perspective, supply side you could argue it could work with an export driven demand...but that begs the question, if the demand was there, they'd already be hiring and not need the assistance anyway unless the credit markets froze for whatever reason.
While US Exports have been growing, its still very heavy on consumption and consumer demand to drive growth. With a large portion of the middle and lower class either unemployed, under employed, and unsure of the future, demand has dried up. Demand dries up, companies cut workers and reduce production, further aggravating the problem of high unemployment and the lack of disposable income in the remaining employed bits of the workforce.
Wow, didn't even realize how much I typed there, enjoy the econ lesson.