Spending Our Way Out of Debt

I wish I’d copied the link, but recently there was an article on CNN written by Penn Gilette (of Penn & Teller fame).

In the article, he is opposed to the idea of spending money in order to get out of debt. I think there are a lot of fiscal conservatives who are against the bailout for the exact same reason.

While it seems counter-intuitive that one can “spend their way out of debt,” am I missing something by pointing out the obvious cliche, you have to spend money to make money?

Any kind of business that’s first starting up has to take out a (sometimes enormous) loan. They are spending their way out of debt by investing in an idea that they believe will make them more money. They are going into debt with the future expectation of turning a profit. Few have made a lot of money without spending a lot of money in often times risky ways.

I FEEL LIKE I’M TAKING CRAZY PILLS!

“you have to spend money to make money” is certainly true. But a more appropriate expression (and more of a truism) would be “someone has to spend money for someone else to make money”. It seems to me (like it does to you) an intuitive fact that you could spend your way out of a recession: seeing as the route of a recession is less money being spent (less people buying → less demand → over supply (which means unsustainable industries)).

Evidently if everyone carried on spending the same amount as they used to there wouldn’t even be a crisis. The problem seems to be that they can’t - because they used to be spending more money than actually existed (and for some reason no one who worked for the banks that were giving them the money to spend switched on to this).

My personal opinion: I think it might be wise to try and figure out exactly how much bad debt there is as a first step. No one has actually done this yet - which suggests to me that the banks still have an awful lot to hide. But right now we’re essentially blindfolding ourselves, turning our back to the problem and throwing hundreds of billions of dollars over our shoulders and hoping that it picks them up and walks off. To me: this seems like whilst it may well be successful, it also leaves the possibility that you will get unexpectedly fucked up the ass.

You can invest your way out of debt, but only if your return on the investment is greater than the interest you’re paying on the debt.

If you spend frivolously and don’t get any return, all you do is make more debt.

selling trillions of t-bills to china that we cant cash, and then printing trillions more dollars out of thin air to throw into sinking ships like citibank or aig or general motors is not “spending money to make money”.

government does not invest, government wastes.

taking from A to give to B represents an opportunity cost. a loss. since the transaction between A and B is not voluntary, it does not represent an increase in productive efficiency, i.e. it does not represent an overall profit.

the purpose of investments is to make money. this is done because economic and productive entities are constantly improving their production process and efficiency, and they seek out actively and merge into the lines of the market which grant greater reward per dollar spent. this is the profit motive, and it is the INCENTIVE which keeps people returning to buy mcdonalds hamburgers every day, just as it is what keeps mcdonalds there selling the burgers to them.

but governemnt does not act in this manner. it does not care what person A wants, it takes from A’s wallet to give to B that which B did not earn by his own merit-- because it was not earned, the money B gains does not represent any actual increase in efficiency or profit in reality-- it represents nothing, but a waste of bureaucratic and administrative costs of handling and red tape, as well as taking those dollars out of the real economy where they could have been spend in a manner which generated profit between freely consenting individuals (i.e. spend just about anywhere in the marketplace, on just about anything).

government does not act from a position of true incentives, it is not bound to reality and to the “best bang for your buck” mentality. government is incapable of doing anything but wasting money (in the form of opportunity costs and lost potential for profits earned, i.e. efficiency generated) when it acts in the economy… this is just the nature of government, or rather, it is the nature of a thief who takes your money and then gives it to someone else. this is NOT a responsible or wise way to “spend” money, as it generates OPPOSITE INCENTIVES than the ones which keep people spending and innovating the economy to ever-more efficient productive processes.

Dorky–

I agree with you. Spending one’s way out of debt is possible. It happens not infrequently in the private sector. It is a matter of investing in enterprises that issue in profits that exceed the initial investment.

felix dakat: I agree with you. Spending one’s way out of debt is possible. It happens not infrequently in the private sector. It is a matter of investing in enterprises that issue in profits that exceed the initial investment."

K: OK, economics 101. If private business aren’t spending and the consumer isn’t spending, money is not moving like money
should be moving. Money is like manure, it only does any good spread around, if it sits in one place, it just stinks up the place.
Keynesian economics is the theory that to get the money moving again, government must act. this has been the standard
operating procedure for governments since the 1930’s, all governments. The depression is an classic example of this practice.
The Germans for example spent there way out of a depression by military spending. Every president since FDR has practice
keynesian economics. Reagan was famous for it as was JFK, LBJ. There is an common theme here. Every time the economy
gets dicey, politicians have cut taxes, 1963, 1983, and 2002, but in connection which is missed has been the use of
keynesian economics shortly thereafter which hides the fact that tax cuts don’t work, but Keynesian economics do work.
The George bush (GB) failure was the expansion, the keynesian part of his expansion was in stuff that doesn’t pay off. Building up the CIA
or the NSA doesn’t reap any kind of economic benefits except for companies who deal with that stuff. The Iraq war was also another
economic failure for it didn’t create any benefits for americans much like the Vietnam war didn’t create anything and led to
some really serious economics problems during the 70’s. If you spend your way to economic health, it must be with factors such
as infrastructure building and the like. Creating jobs is the way Keynesian economics works. The debt does take
a while, a long while to pay off, but it is easier to deal with with the economy moving again instead of
just sitting there.

Kropotkin

Any debt can become “bad debt”, there is no good debt and bad debt, they are all fundamentally equal. They are all bets, based on future expectations, based on similar risk levels after all, no one really knows what the next day can be, what can happen to a given industry, sector, to a given investment. All debts are in a sense bad debts, if the simple psychological outlook of a few million people change overnight, something very simple to achieve with mass media, if they all become just a little bit more cautious or pessmistic or feel like risking less, if they just want to not spend, all of a sudden a whole lot of debts that seemed “good” and reasonable will become bad.

And just the reverse is true, if China, India and Brazil together start buying just a few million more cars, something very easy to happen, then all of a sudden GM won’t be bankrupt anymore, but may actually become very profitable.

And in fact in the USA too much infrastructure has been built in the forms of suburbs and McMansions. Not in the form of public transit, but for private goods like large homes. The USA now has more than ten million homes sitting empty because of this. Then again with all those homes sitting empty there is no connection between market demand and price, because they cost too much for the average salary. There is no such thing as a benefit to the americans, because economy is a process, is not something solid, you can’t create or build wealth, it is just a relationship, a power relationship between masters and slaves, between who has more power and money and who has less, and the way the actors act within this relationship, how the power is manipulated and distributed. Nothing is ever being created, everything is just an instantaneuos snapshot of temporary relationships. For this reason the idea that “jobs can be created” makes no sense at all, has never made any sense. When jobs are created they are mostly invented, they are simply forced behavior upon millions of people to perform an activity, like when money is spent for wars, when wars are started, when money is spent on the CIA and NSA and thousands of “new jobs” are “created”.

nameta9: And in fact in the USA too much infrastructure has been built in the forms of suburbs and McMansions. Not in the form of public transit, but for private goods like large homes. The USA now has more than ten million homes sitting empty because of this. Then again with all those homes sitting empty there is no connection between market demand and price, because they cost too much for the average salary. There is no such thing as a benefit to the americans, because economy is a process, is not something solid, you can’t create or build wealth, it is just a relationship, a power relationship between masters and slaves, between who has more power and money and who has less, and the way the actors act within this relationship, how the power is manipulated and distributed. Nothing is ever being created, everything is just an instantaneuos snapshot of temporary relationships. For this reason the idea that “jobs can be created” makes no sense at all, has never made any sense. When jobs are created they are mostly invented, they are simply forced behavior upon millions of people to perform an activity, like when money is spent for wars, when wars are started, when money is spent on the CIA and NSA and thousands of “new jobs” are “created”.
[/quote]
K: ok, a couple of things here. First of all, housing is not infrastructure. All the stuff put into place to make that house is infrastructure,
but the house itself is not. So the roads to the house, the bridges around the house, the schools, hospitals, fire and police, public transportation,
so on. Now as far as jobs being created, clearly if you build a road, it takes workers thus people having jobs to build that road. If you build
something, it takes workers to build that something. That is jobs. If you build a hospital, you have workers building that hospital, than
workers staffing that hospital, thus the creation of jobs. Now it may temporary, but a series of temporary jobs is the same as one permanent job.
(not quite but for point of this discussion it is). Jobs are created all the time and lost all the time by the millions. Our economy is not static,
it is always moving, which it why it is a very hard target to nail down.

Kropotkin

I probably should’ve been more specific, because although the bank and auto bailouts are obviously putting us into debt, it’s Obama’s 3 trillion dollar plan that has ruffled some feathers.

The money going into healthcare, education, and clean energy. The argument goes that we shouldn’t be spending money on such things, especially at a time like now. McCain and other Republicans have even suggested a spending freeze, where no money would be spent on anything aside from defense (sigh).

The main point of my post, which should’ve been more clear, is that it IS worth “investing” in education, healthcare, and clean energy.

It seems common sensical that our economy is going to be driven off of the knowledge and creatitivity of our citizens. If another country has more intelligent people working on alternate sources of energy, technology, etc., we aren’t going to be able to produce things that the world will need to buy from us. Simple as that. How do we solve that problem? Spending money on education, and revising the educational system to that which has been more effective in other countries.

Energy. The entire world needs it to operate, and it seems like a foot race to become the nation that produces clean, abundant energy to sell for cheap to all the other suckers who didn’t come up with it first. Education has taken the back seat to defense for too long (as I believe it was FDR who warned about, the money to build approximately one school and one tank is equal). If we don’t have citizens educated enough to create, invent, and discover such forms of energy, we’ll be the ones buying, not selling. And if we aren’t funding the people who are already as close to the top of the game as they’re going to get coming from a subpar educational system, then we’re going to lose the race.

I don’t thinK i’m qualified enough to talk about how healthcare ties in, but it seems like it fits into Maslow’s hierarchy in one way or another.

You need to get a clue, read this:

viewtopic.php?f=4&t=168156

  1. Education means absolutely nothing, there has never been so many educated people worldwide, that can travel, that companies can hire, and in fact even geographical position is not very important anymore, information flows through the internet, so any information product requiring “education” can be bought anywhere in the world.

  2. The only possible energy that will be available in the future will be SAVED ENERGY. Since saving energy is a political - economic choice that goes counter the present status quo, everyone keeps on imagining some miracle energy from some miracle invention. It will not happen, you can have all the energy in the world by simply changing the systems of transportation, USING BUSES, simple buses, PUBLIC TRANSIT, etc.

  3. By greatly reducing the need to commute to irrelevant jobs, most jobs in the USA are now mostly irrelevant, especially banks and offices, you can save a huge amount of energy and money. You can also telecommute through the internet, you could work only 2 or 3 days a week, or greatly reduce the workday to at most 4 hours.

The fact is the economists and scientists and poticians keep on thinking that the future will resemble the past, the past 20th century was an exception, was a one time quirk when all the technologies and consumerism and innovations were coming online, etc. There is only so much that you can further invent and innovate, and in fact real innovation is mostly stagnating, there are no further optimizations to be made, aside from paying workers less and less money or scaming them, there is very little margin of further profits from technology.

An interesting paradox of this is that anyone who is associated with any form of real work, any work that is even remotely practical or really needed is the one that will get laid off, or “optimized”, or outsourced etc.

On the other hand if the work is intractable, undefinable, mostly criptic and strongly “peoples related”, “connections related”, very arbitrary and especially so abstract as really being not needed, useless and mostly a fraud like all the banks with their “derivates and financial products”, all the health care insurers, the AIGs of the world producing abstractions upon abstractions, it is probably secure. If you work in these ever more abstract fields you are probably safe and can also get some bonus.

If you work in a factory or actually build homes with your hands, you are sure to be picked out and fired, since real work is the most disrespected of modern western - capitalist societies.