Balanced Budget Stimulus?

[PearlSB4U]

Can someone on this forum please explain to me how cutting Federal expenditures will stimulate growth in jobs & help us out of our current bad economy?

Shouldn't we retain or even increase any Federal spending that might stimulate jobs or put more $ into the hands of consumers--at least in the short run?

After the patient can get out of bed & walk steadily, maybe then we can impose a stricter diet?

I'm not against balancing the budget, but timing may be critical.

Republicans keep saying that raising taxes on millionaires would cause short-run harm to our delicate economy. Wouldn't the same principle hold for stimulative Federal spending?

Can we cut our way to prosperity?

 

[scooterbug44]

I don't think increasing taxes on those who can easily afford it and so they pay the same that many others already do will stall an economic recovery.

Not sure about reduced federal spending, I think that depends on where the cuts are. For example, I think cutting pay to mercenaries is a good thing that will not hurt us.

 

[idlewind]

Can someone on this forum please explain to me how cutting Federal expenditures will stimulate growth in jobs & help us out of our current bad economy?

Shouldn't we retain or even increase any Federal spending that might stimulate jobs or put more $ into the hands of consumers--at least in the short run?

After the patient can get out of bed & walk steadily, maybe then we can impose a stricter diet?

I'm not against balancing the budget, but timing may be critical.

Republicans keep saying that raising taxes on millionaires would cause short-run harm to our delicate economy. Wouldn't the same principle hold for stimulative Federal spending?

Can we cut our way to prosperity?

If you cut government borrowing more credit is available to business to borrow and expand operations thus hiring more people. The only other way to make credit available ( which is what the FED is currently doing) is to expand the money supply and thus creat inflation in the long-term. Inflation is a real drag on the economy.
So the only way to cut government borrowing without raising taxes is to cut spending.
A basic explanation can be found here:
http://www.adamsmith.org/blog/tax-and-economy/forget-keynes.-spending-cuts-don%E2%80%99t-hurt-the-economy,-they-help-it/

 

[PearlSB4U]

If you cut government borrowing more credit is available to business to borrow and expand operations thus hiring more people.

Are we currently in a credit crisis?
Is there currently a shortage of $ for business to borrow?
I thought the financial institutions had lots of $ available at very low interest rates?
Am I wrong about this?

 

[idlewind]

Are we currently in a credit crisis?
Is there currently a shortage of $ for business to borrow?
I thought the financial institutions had lots of $ available at very low interest rates?
Am I wrong about this?

They have cash on hand due to the expansionary monetary policies of the Federal Reserve. Expanding the money supply leads to inflation, which is a huge drag on the economy. It is far more preferable for the credit supply to come from money that has been saved.

 

[futurebeachbum]

Are we currently in a credit crisis?
Is there currently a shortage of $ for business to borrow?
I thought the financial institutions had lots of $ available at very low interest rates?
Am I wrong about this?

Actually, there is a pretty severe credit crisis for small business.

The banks have figured out that they can get money interest free from the Fed and invest that money in Treasuries and earn a 100% risk free guaranteed return. The alternative is to loan money with some risk to businesses. Loaning to businesses would help the economy, but earning a risk free return helps the banks more.

 

[PearlSB4U]

President Obama signed a small business bill Sept. 27, 2010, that enables small businesses to take advantage of new and extended tax incentives, including an extension of 50 percent bonus depreciation and an increase in the tax code Section 179 expensing limitations.

The legislation (H.R.5297) also includes a $30 billion lending fund for community banks to aid credit availability for small firms, fulfilling Obama's statements that small businesses need tax cuts and greater access to lending.