As I have been saying for over a year now, arguments that fiscal stimulus is needed are not going to work. George Soros makes these arguments in the video below. Not only are these arguments not going to succeed, they are counterproductive.
What I think people like George Soros pushing stimulus miss is the degree to which fiscal stimulus and bailouts have been conflated in people’s minds. You have to remember that most people take a holistic approach in viewing economic policy. They might say: "is the economy better today than last year?" or "did the economic policies make things better?"
The easy answer to these questions is that things are not better. The logical conclusion therefore is that policy has failed. I don’t agree with that analysis because in an environment of excess capacity, more money and more spending adds to economic activity whether its the government doing it or someone else. And stimulus – over the short term at a minimum – adds more money and more spending. Whether it fails over the longer term is a different question.
Nonetheless, it is going to be very difficult to argue against this general sense that people have that things are not better. I don’t know why people try. Then you see that asset markets are doing very well – that Wall Street is back making a shed load of cash. At the same time you see this whole foreclosure fraud thing spiralling out of control. The average person in America has to get a sense that something’s not right – that policy was responsible for this. So, when you hear the word ‘stimulus,’ it’s hard to separate any of this out. That’s just one aspect of what makes these arguments unconvincing.
What is a convincing argument? More people need to be employed in America. More people need to be doing and making more things that earns them more dollars. That’s a winning argument. How you do that – get more people doing and making more things – is where the rubber hits the road. What role should government play in this? taxes? the private sector? All good questions – but unless you start making this argument – that it’s about jobs – and fixating only on this, the U.S. economy is not going to go anywhere.
See the video below for Soros’ remarks – some I agree with, others I don’t. The clip runs 10 minutes.
If you want some numbers and figures on stimulus, see the link below.
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