The Truth Behind Spending

While the budget is being shopped around you will hear much trepidation from deficit hawks but you will notice that few are in fact economists. Most economists know that the government is the only sector able to finance our recovery at present and that deficits, if they are to be run, should occur when needed to get the economy back on track.

The scale of this crisis is unprecedented. As unemployment accelerates more and more dramatic spending will be required to compensate for losses in consumer expenditure and private sector investment.

After World War II began the deficit to GDP ratio gained historic heights in the high twenties which coincided with a drastic reduction in unemployment.

The figure in Pumping Life Back into the U.S. Economy: Why a Stimulus Package Must Be Big and Targeted [1] by Scott Lilly, released January 2009 by the Center for American Progress, makes a compelling visual.

This massive government spending that funded job creation alongside an esprit d’corps lead to a populous eager to pursue hard work, develop new skills and buy government bonds moved the economy from the great depression into the golden age of American prosperity. Let us not wait for decades of unnecessary suffering and a horrific World War to pursue these goals this time around.