That’s right. Taxes reduce the amount of money available to the private sector and tend to decrease economic activity. 
 
Ocean Guy: Our well isn’t dry, yet…  But we’ve primed the pump and are running it much faster than the well can replenish itself. 

The U.S. economy is working well under capacity, as seen in the unemployment numbers. 
 
Ocean Guy: We’re in deep do do though if the dollar loses it’s position as the world’s reserve currency. 

That will happen eventually, regardless. The U.S. is not the only powerful economy in the modern world. 
 
Ocean Guy: This Administration, by printing money thus weakening the dollar; and expanding government and it’s inherent inefficiencies are making our problems much worse.
 
Other than the stimulus, which is a short term expenditure, the federal government hasn’t expanded significantly. 
 
 

Private enterprise farms, mines, or creates goods for barter/sale.  Using money as the medium for trade, Private enterprise takes one dollar and turns it into something more than a dollar.  If not, the enterprise fails… it cannot print it’s own money, it can only farm, mine, or create goods to sell.

Government can take part of what the producers create, and it can print money to fill it’s coffers.  But however it does it, one dollar in the coffer, after paying it’s own overhead costs, means there is something less than a dollar to take out of the coffer.  As long as the governemnt’s money is recognized as the worldwide currency, the system has the chance to work.  But except for the short term, an infusion of money into governemtn coffers is no way to stimulate an economy.  Remember a dollar into the coffer means somethign LESS than a dollar available to spend on goods and services.  That may stimulate spending for a short time, but it’s a drag on the economy unless Private industry is able to contribute enough to the coffers to overcome the inefficiencies in government in operating and spending.

Priming the pump?  Doesn’t work when the well goes dry, a regulator does you no good then. 

Our well isn’t dry, yet…  But we’ve primed the pump and are running it much faster than the well can replenish itself.  We are borrowing from others to keep the pump running and printing more money to dump into the well… which seems a bit silly in the real world.  This rickety stool supported by taxes, borrowing, and printing is barely supporting our weight.  We’re in deep do do though if the dollar loses it’s position as the world’s reserve currency.  As bad as things are now, with the behemoth of government forcing us to borrow and print more and more, it would be disasterous for us if the dollar loses its position. 

This Administration, by printing money thus weakening the dollar; and expanding government and it’s inherent inefficiencies are making our problems much worse.  Keynesians have show no regard for the fuel/water to keep the pump running.  Applying a governeor to the system only affects the rate at which the well gets pumped, it only affects how long it takes the well to go dry.

The bottom line is that without wealth, without increased Private enterprise profits, which will be taxed to refill the well, ALL government spending is unsustainable.  YES, some governement is essential, some governemt is beneficial, and some government is nice to have.  But today… Government costs too much… it is WAY too big, and is too big a drag on its productive citizens.

Keynes?  Nice classroom discussion topic, but the reality is that massive stimulus for governement spending is NOT having the predicted nor desired effects.  Once again the reality has fallen short of the theory’s promises.  It’s way past time for government to shrink and for the growth in government expenditures to stop… or at least grow more slowly than the economy… IT’s also WAY past time to REMOVE government spending from the GDP.

GOVERNMENT PRODUCES NOTHING.  Government only consumes and redistributes, it PRODUCES NOTHING, so why is it part of GDP? 

Interesting analogy, though the water pump is the traditional analogy. In order to get a small engine started, you might pump extra fuel into the chamber. Or put water in a pump to prime it. 

Allen: The problem is where do you get the energy from?

With a water pump, from water you saved in the bucket from pumping the last time. With an  engine, from your fuel supply. With the economy, either from savings or by borrowing.

Allen: It’s not often you get to see someone arguing that a perpetual motion machine is possible, but also increases energy in the system.

That is the common misunderstanding. It’s called countercyclical policy. In terms of a heat engine, it’s called a governor, which regulates the flow in order to keep the engine from running too fast or too slow. 
http://tinyurl.com/3u8ev56

Keynes was not wrong from the standpoint that injecting energy into the system might ameliorate a slow running system. The problem is where do you get the energy from?

Red herring.

Ari,

“Seems these dislocations are largely due to misreading market signals, and the breakdown is the indication new choices need to be made, a different allocation of resources against needs is needed. Government employees by their definition are either (1) much more able intellects than average or (2) inappropriately compensated for the work they do.”

Why only those two choices?  What about cases in which they need to do work that the private sector cannot (regulatory oversight) or should not (Marines)?  It is strange the way you divide the world into these dicotomies.  By the way, on the debate over public workers, they are not necessarily more able, but they are more educated, on average, than private sector workers, which is why you have to adjust for education before comparing salaries, which partisan conservatives always fail to do (surprise, surprise…).  That is likely why you make the two (false) points that you do here.

 ”So if stimulus is needed feed it thru the private sector (by letting those already successful at creating businesses and jobs keep more of their money, from the very small to the very large, and also remove the hidden costs of unequal regulation – that force non-market based factors into their own choices).”

Who do you think is doing the existing stimulus?  The roads being built and other infrastructure projects have many private firms involved.  Fareed Zakaria rightly pointed out that the US should copy Asia (yes, copy best practices outside of its borders–gasp!) and set up an infrastructure bank so that these projects have higher private sector involvement and are allocated based upon economic need rather than political largess.  These are good ideas, which Dems and Repubs can agree to.  But right now, many conservatives reject all government funding for stimulus even when it goes to private firms.

Also, there is no proof of increased regulation under Obama hurting the economy.  Private firms are facing the same regulatory environment that they did under Bush and Clinton, and it is far less strict than it was under Nixon, when the country was growing at much higher rates.  This is yet another canard without empirical support from the anti-Obama crowd.

“I don’t understand why/how folks can claim that employment by government (where employees by definition almost always follow a process dictated by law, rather than being able to exercise intellect and judgment as is often needed in the private sector to succeed) has the same economic benefit as work that often has an above the line return in the private sector, but is always a below-the-line cost when done by a government.”

Wow.  Our soldiers add no value, exercise no intellect and have no judgment.  The people risking life and limb in Iraq and Afghanistan will be happy to hear that from you.  There is a requirement for intellect and judgment in public positions, although Bush and his team clearly didn’t exercise it given their budgetary math and military planning…  But seriously, economic activity in the public sector on average is less efficient, but not always and certainly not in cases in which there are problems with th private sector doing the work.  One such case is when the economy has a crisis of demand and confidence.  In that case, the less efficient public work can revive the economy, and thus the trade-off on efficiency is more than acceptable.  In other words, there is no crowding out when the private sector isn’t doing anything to crowd out in the first place.

“We have the case now where congress spends 10b$ per day, their laws create regulations that direct the spending of another 10b$ per day (i.e. in ways the market would not choose), and congress is borrowing from the future to meet entitlements another 10b$ per day.. which leaves maybe 10b$ per day of free-market activity.  No wonder the economy has stalled, and salaries have been stagnant and declining as government directed benefits absorb all middle-class productivity increases (save for those who are spectacularly productive and creative and rise out of the middle-class).”

Interesting math.  We run a $1TN+ deficit on a $13TN economy.  The majority (about 61%) of that activity is in the private sector.  By your math, the government is spending $3.7TN and borrowing another $3.7TN, which leaves only $3.7TN of private market activity.  That implies only 33% of the $13TN is in the private sector, which is not what the official figures show.  Better check your facts.

http://blogs.reuters.com/felix-salmon/2011/06/20/charts-of-the-day-the-rise-in-structural-unemployment/

It suggests the existence of a permanent disaffected and chronically unemployed labor class.

Good question is, why is it so high in the U.S. as compared to other countries listed in the graph (presuming, of course, that these numbers are accurate…different countries measure “structural unemployment” differently and I know the numbers in the UK and Belgium, as examples, are astoundingly high).

The Bush Administration probably averted that catastrophe with TARP. The U.S. and other developed nations have a number of automatic stabilizers that kicked in. But even with the boost of the ARRA, the U.S. economy is in the doldrums. Debt’s not the immediate problem, or rates would be much higher. Rather, demand is still very weak, and investors are still waiting to get back in. Typical recoveries from financial panics can take 5-7 years. 

http://www.investors.com/NewsAndAnalysis/Article/575847/201106201754/Stimulus-Prevented-Second-Depression-Evidence-Says-No.htm

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POLITICS Sponsored by:
Did Obama Really Prevent A Second Great Depression?
By JOHN MERLINE, INVESTOR’S BUSINESS DAILY
Posted 06/20/2011 05:54 PM ET
 
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It has become a common refrain at the White House and among administration supporters that President Obama’s aggressive efforts to stimulate growth prevented an economic catastrophe.
 
“We had to hit the ground running and do everything we could to prevent a second Great Depression,” Obama told supporters last week.
 
Politically, the claim makes sense. Casting the challenge Obama faced as immense can help explain the economy’s lackluster performance in the two years since the recession officially ended.
 
But is it an accurate portrayal of what really happened?
 
IBD reviewed records of economic forecasts made just before Obama signed the stimulus bill into law, as well as economic data and monthly stimulus spending data from around that time, and reviews of the stimulus bill itself.
 
The conclusion is that in claiming to have staved off a Depression, the White House and its supporters seem to be engaging in a bit of historical revisionism.
 
Economists weren’t predicting a Depression.
 
White House economists forecast in January 2009 that, even without a stimulus, unemployment would top out at just 8.8% — well below the 10.8% peak during the 1981-82 recession, and nowhere near Depression-era unemployment levels.
The same month, the Congressional Budget Office predicted that, absent any stimulus, the recession would end in “the second half of 2009.” The recession officially ended in June 2009, suggesting that the stimulus did not have anything to do with it.
The data weren’t showing it, either.
The argument is often made that the recession turned out to be far worse than anyone knew at the time. But various indicators show that the economy had pretty much hit bottom at the end of 2008 — a month before President Obama took office.

Of course, the argument now is whether we are really in a recovery, cruising along the bottom, or on the threshold of a double-dip.