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The Critical Election Question: Can We Spend Our Way Out of a Slump?

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I don’t know about you, but I’m growing weary of the persistent negativity during this political season. It reminds me of a name-calling squabble from elementary school. Moreover, have you noticed how easy it has become to predict what an individual will say if you know in advance which candidate they support? It’s as though critical thinking has taken leave and has been replaced by the same ol’ sound bites. And sadly, sound bites often have little regard for facts, especially if the facts make their candidate look bad. Facts, however, are not just important, when it comes to decision making, they are essential! 

Today, it has become increasingly difficult for many people to separate fact from fiction as the political spin machines grow in creativity. And this brings me to my topic, the economy. We are all aware that economic growth has been and continues to be sluggish. What is particularly disconcerting is how President Obama says he will do “this” or “that” to get the economy growing again and nobody is asking, “If these ideas are so wonderful, why haven’t you been implementing them?” But I digress.

The question at the center of this debate seems to be this: Can we spend our way out of an economic slump? After all, deficit spending has been the strategy for the past three years. In the spirit of the long-departed John Maynard Keynes, government spending is just what the doctor ordered when an economy falls on hard times. However, is the doctor a quack or a genius?

Over the past three years, our government has run massive deficits averaging $1.3 trillion per year! To dispel any misconceptions that I am incapable of criticizing Republicans, Bush the younger was also a very big spender. During his eight-year reign, the Federal debt increased from $5.7 trillion to $9.4 trillion, an average of $720 billion per year. However, during the first three years of the Obama term, the federal debt has mushroomed by more than $6 trillion, and now exceeds $16 trillion. Yes, we had a severe recession in 2008, and some level of deficit spending was probably necessary to avoid a deeper, more serious depression. But there seems to be no end in sight to these trillion-dollar-plus-per-year deficits. Can we finally agree that massive government spending will not fix what ails us? Can we also agree that for the second time in 50 years, Keynesianism has proven ineffective?

Perhaps, we need a new approach? I’ll trust that you will engage in your own critical thinking here. Maybe this question will help.

Which of the following would you say is more true:

If my income was higher by an additional $1,000 per month after taxes, I’m more likely to…..

A) spend more

B) spend less

Thanks for reading and have a great week!