Prosperity creates spending, not vice-versa

Roger Kerr blogs:

Roberts uses a neat analogy to describe US stimulus package later in his post:

Think of having a lot of wet wood and trying to get it going by lighting newspaper as kindling. There's a fire for a while, while the newspaper is burning. But once the newspaper is consumed, the wood hasn't caught. Even burning a lot more newspaper (bigger stimulus package) isn't going to get the wood dry enough to catch fire.

The same applies to government in . The role of the government should be to provide a framework that allows the economy to prosper. Cutting is a sure way to heat up a damp economy.

Cutting government spending will generate higher growth. Growth generates prosperity. Prosperity creates spending: a roaring fire using dry wood without wasting stacks of paper getting it going.

It is worth remembering that the US had a giant and their unemployment rate is 9.6%. They spent $800 billion on fiscal stimulus and claimed it would yield $1.50 in growth for every $1 spent.

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