I always find it amazing how some folks want us to believe there’s a fiscal multiplier- but only if you cut revenue. (That means letting certain [rich] folks pay no taxes.) They just tried that in Kansas- and any sentient being can recognize that disaster.
But, there is a fiscal multiplier in a recession- one we barely tried. Spending money on infrastructure- when the prices are low (because everyone is desperate for work and revenue). That’s not necessarily true in a normal economy. (It’s almost normal now- so it’s probably way too late for such a stimulus).
Had we built our roads and bridges during the recession, we would have gained a lot. Not the least of which is to have a viable transportation system. But, every dollar we had spent on the roads would have let construction workers- the ones who had no jobs to work- spend money they would now be making. And, those places where the money was spent would spend their money- and so on.
Data indicates that during a recession the multiplier is about 1.3 to 1.7. During the Great Recession, that multiplier was probably closer to 3.1. Oh, sure, many politicians decried the climbing deficit, but as I and others responded, that deficit would evanesce as the economy lurched toward normalcy. Which, of course, is exactly what it did.
And, you can see the results of not spending money. Most of the European nations are still experiencing a lagging economy because their governments cut spending during the recession. And, thereby fed the recessionary pressures.
It’s the old adage- starve a fever but feed a cold.
I never thought of that adage in regard to spending/not spending. It almost sounds like the idea of needing experience for a job – or needing to establish credit – but until someone takes a chance on hiring you to let you gain experience, or extending a credit account to let you begin building credit … really hard to do!
K. Lee Banks recently posted..Wordle Wednesday – About My Dissertation
I agree with that last portion, KLee. I remember friends being delivered that same conundrum. Which is why we offered a slew of “first-timers” the chance to join our enterprises. It helped even more with our desire to have folks employ our systems approach- we never had to “unlearn” them other ways.