Recession - Should governments Increase or Decrease expenditure?

The old saying comes to mind..you got to spend money to make money..

This may be a simpleton view..but it depends on where the money goes if its invested and what the long term pros/cons will be if it did/didnt get invested.. I'd say that if our leaders (at least in the UK) were in touch with society and reality then perhaps i'd say invest money..but regardsless the money needs to be spent for future generations..

another saying comes to mind..damnd if you do damnd if you dont.  

We're already fucked, so it's not going to happen until after a collapse, but what the hell.

Spending needs to be cut in half, at least.  Deficit spending needs to cease to exist outside of a real war, and this idiotic debt needs to be payed off as fast as possible.  Having so much of the worlds capital tied up in government bonds has utterly fucked the growth of the private sector.  Government, as a net loser on investment, doesn't grow the economy when it expands.

Take TARP.  It didn't do any good.  Why didn't it do any good?  The banks never actually had the money.  They were lent several hundred billion, and bought several hundred billion in govt bonds.  They then paid back the money to get out from uncles finger with money they would have been lending to private industry and consumers.  They still own the bonds.  We got our money devalued, the banks locked more of their capital up in govt bonds, and the govt got more debt on it's books.

See govt spending after WWI and the depression that followed for an example of what not to do.

Sounds back to front. The current government (left wing) has increased spending and increased public debt, while the next government (right wing) will reduce spending.

Come next May (assuming the election is as late as possible) I will be voting Conservative, even if it does cost me money...

You mean you'll be voting Republican, and hoping they're Conservative...

Fucking politicians, I give em four years before they fuck it up even if they start off playing the part.  Maybe they can sucker themselves into one term limitations before they realize the mistake.

Your right, got mixed up , let me change it.

He actually means what he wrote. Not everyone here happens to be from the US you know. In UK where he lives the three main options are Labour, Conservatives and Liberal Democrats. Not that names actualy mean anything significant these days.

And on the topic, as a wise man Keynes once said - spend in recession, save when not. Unfortunately all the politicians out there belive seem to belive in 'whatever, just spend the whole lot'

Indeed. The parties are so similar you wonder if it's actually worth voting

Yeah - spend the whole lot on themselves...

Good point, so I needed to switch one word.  Still works out the same though.  Everyone loves to spend someone elses money.

Tried that, twice.  It got us two depressions for two recessions.  Keynes was an idiot for coming up with the idea after these instances.

The multiplier effect for government action tends to be less than 1, a lot less.  If they were perfect people, they'd have perfect spending.  They tend to be fucking retards instead.

I know, derogatory comments regarding the mentally disabled are unacceptable.  I don't actually think they're politicians.

I don't really think it matters, neither the left nor the right wing wants to decrease expenditure (or at least the deficit). In the U.S. at least, it seems the liberals want to increase spending and the conservatives want to cut taxes. Either way we don't very many, if anyone, willing to do the inverse; decrease spending and increase taxes, which will be necissary sooner or later, though in general it will be less painful if done earlier.

Directly to the OP though, I suppose increasing expenditure in the short term in a recession is the best way to go if possible. When private demand goes down, some degree of government cushioning is likely useful to prevent collapse and give business time to adjust to the new conditions. However, the problem is that this cushioning has to be removed as soon as the business conditions improve, and this is often difficult for governments to do. Even worse, you can't simply go to your prerecession spending levels, you've got to go below them to compinsate for the debt earned during the recession. That is even harder for governments to do, hence (one of the many reasons) why the deficit in many western countries is so high.

Unfortunately the politicians mostly don't seem to care because most of them on both sides are highly corrupt. IF there is one who isn't corrupt, you can expect them to do their best to Litmus test them out of their party.

As to the question, Debt is always bad for long term growth. How does spending income on interest payments help your personal wealth? It doesn't work any different for the U.S. government or economy.If we didn't have the interest on the debt to pay down, we could make ideologues on both sides happy by cutting taxes and swelling entitlement programs because we'd actually be able to afford it.

As for spending. Spending doesn't actually matter, it is trading that matters. Money is a commodity of trade and it only has meaning when it is actually being traded. When it sits in any one set of hands it is meaningless. The porkulus bill wasn't designed to stimulate anything except special interests. A real stimulus isn't about spending, but in giving money to a sector which is willing to turn around and spend it again immediately. If I give you $100 to spend next year, it doesn't help the economy nearly as much as $1 I spend directly on someone who turns around and spends it the same day and does the same with another. If that $1 changes hands 10 times a day, then it will have 365 times the bump that the $100 a year down the road would have.

Keynes had it right

Our government needs to spend, but they need to be long term investments in technological industries. 

Deficits aren't good, but people need to understand that deficit spending isn't necessarily a bad thing.  If your deficit spending is invested and produces substantial revenue, it can easily offset the money spent during the investment and the interest owed.  Not only that, but the U.S. debt is consistently "inflated away" because most of the debt is owned by private U.S. citizens, not by China as is so erroneously presumed.  Keep inflation at a manageable rate and make wise investments and that debt shrinks. 

Granted, if all that deficit spending results in 0.00 additional growth, then you are pretty screwed.

How bout this...

If you knew that you were getting a pay cut from your work, would you spend more money, even if you had to borrow it?

Answer that and you answer the main question.

A recession is a pay cut for many citizens, and the government as a whole.  It is a good thing - it forces limited government.

If the government were run like a business, it would work out the way it should.  But no, some politicians get rich of the backs of taxpayers.  Its NOT your f###ing money Washington!!!

Hence the advent of Keynesian economics, an excuse to be irresponsible and continue power consolidation.

OH GOD WE'RE OUT OF MONEY WHAT DO WE DO!?!?

I DON'T KNOW SPEND MORE MONEY!?!?!

Brilliant!

well, macro economics at one point taught the best way to escape recession is to spend your way out of it.

My main problem with a Keynesian view is that it assumes the human condition is defined by consumption; it's exactly like the Hayek crowd in that aspect, despite their sprawling disagreements on theory details.

Fundamental objections to rampant consumerism aside, modern economies depend on a waltz between the public and private sectors, and if the private sector is faltering, it seems basically reasonable that the public sector should do its best to help prevent both of them falling on the floor.

I believe that's the theory of herp de derp economics. The best way to manage any economy is to spend as little as possible so that companies can expand and hire more people, and so that people will be able to buy more stuff to fund the comapnies. If you take the direct route you will help people temporarily but bankrupt your government and do nothing in the long term.

Not a fan of democrats, but all I know, under our last conservative prez. we saw tax cuts and higher spending. That's just stupid.

All of the money the government gets is derived from the private sector.  The government makes no money on it's own, it forcibly confiscates its money from private individuals and organizations.  Basically, the government can't create wealth because any money it spends is money that was already removed from the economy.  Government spending is similar in function to a burglar breaking into your house, stealing your money, then buying something with it.  Sure, money and goods changed hands, but nowhere near as much as if that robber had earned his money by producing a good or service and then bought the goods with his money, letting you keep yours, which you would probably spend on a good or service of your own.

I hate that graph.  It's missing the most important information, the legislature compositions.  Well, it also ignores the minor detail of massive inflation being the only reason debt decreases for the first half, but whatever.

The executive branch executes, the House picks the numbers.  Clinton was blocked by a republican congress that fought him tooth and nail over spending cuts, Reagan and Bush 41 had a democrat house controlling the purse strings, with maybe a little chance for moderation in the senate, but reconciliation prevents Senate republicans from philibustering a budget, even when they had the majority they had to keep everyone in line to avoid hitting 51 votes for the democrat budget.  It's why they started it, to get budgets through the split legislature in 1981.  They pretended they were cutting spending by fixing the inflation issues, but they went way up on spending even if less so than originally set up in the outlays from Carter's incompetent legislative body.

I'd be happy as a clam if they'd just vetoed everything, but you can't veto everything without cutting off the military increases, and we might have actually needed them.

Bush 43 is a tard for not vetoing every last budget though.  He could have done it without causing problems.

Yup. Criminals interested in buying things like a civilian-controlled military, a continent-spanning transportation infrastructure, a pre-trained workforce, and a theoretically trustworthy investment market.

From the Boston Globe

"Recall that President George W. Bush inherited a budget solidly in the black, as well as a projected 10-year surplus of $5.6 trillion. But the tax cuts, new entitlements, and spending increases he oversaw resulted in more than $2 trillion in red ink, and that’s before the bank bailout. And by the time Bush left office, his policies, if carried forward, would have spelled another $10.6 trillion in debt over 10 years.

Now, let’s be clear. Obama’s plans will also mean unsustainably large long-term deficits. Still, it’s important to note that those projected deficits are smaller than they would be under a continuation of Bush’s policies."

I couldn't believe how messed up our budget was under Bush. I don't like a lot of what Obama says, but the guys been stonewalled every step of the way. You can't get much done that way, and you can't fix anything either. We need tax increases, and we need spending cuts both!And at least he tries to do what he says, unlike most politicians. I can respect that.

You can't be the "biggest" world super-power without generating some revenue, and things like roads and schools don't just pay for themselves. We need taxes, and we can come back into the black, we need higher taxes. That said, we spend too much on bulls***. Every legislator seems to have a hundred pet projects that they want to fund with tax payer money. Republicans as much as dems, but when it's their turn to talk, everyone complains about the spending happening everywhere but in their own districts. It's a sad and stupid joke.

Every legestlator seems to have a hundred pet projects that they want to fund with tax payer money. Republicans as much as dems, but when it's their turn to talk, everyone complains about the spending happeing everywhere but in their own districts. It's a sad and stupid joke.

The only problem with Republicans is all their war/defense spending. We need another Thomas Jefferson, cut the standing military while fighting two wars with a surplus and doubling the size of the country as a little side project. (Mister we could also use a man like Herbert Hoover again)

That's crap reporting.

2000 ended with the .com bubble, 2001 brought 9/11 with it.  The projected surpluses were also bullshit, they didn't take into account any of the events that stunted economic growth.

There is always a more significant loss in revenue from a gdp contraction when it's from a top heavy income tax.  The 20% of GDP tax revenue in 1998-2000 were an anomaly caused by the bubble.  The reciepts over the Bush administration were above average, it's the insane spending increases worked into the entitlement programs that are blowing out the budget.  If we were smart, we'd have switched to a national sales tax(not VAT for the love of God, hidden is bad) so we could have more consistent tax income.  That still wouldn't help the idiots

Obama isn't going to cut his new Medicare expansion, and not renewing the tax cuts wont do a damn thing to offset it.  His own numbers are for over twice as much deficit spending as we just had with Bush.