Right you're diminishing consumer spending by funneling it through the government, who may or may not be spending it in a way that has a good return. My argument is that the American people are already doing this though. They're taking income that they would normally spend on consumer goods and using it to pay down debt. Partly because they have an awful lot of it, and partly because of fear of what may happen in the future. If they aren't going to be pumping it into the economy, why not have the government take it and do that for them?
Again, I disagree that paying down debt doesn't have just as much positive economic impact as buying something at a store, much less that it can be equated to taking that money out of the economy. IMO, that's just a completely incorrect assumption. There are two sides to the economic equation, and they need to be somewhat in balance. They're different sides of the same coin, and it's unfair to place more weight on one than another.
Also, the debt they're "choosing" to pay down mostly consists of credit card debt, right? But even in the medium term that creates more consumption potential, not less. A dollar I spend paying down a credit card equals a dollar+interest worth of stuff I can buy next month. Unless you are being incredibly short sighted, this is going to be preferable to the alternative. Certainly taking money people might have used to pay down debt in order to artificially increase spending in another area is questionable at best.
As for money leaving the banks and heading back to the people, I don't have good numbers on how much lending has returned to the housing market (as an example or where there previously was a lot of return), and whether or not that's anywhere near the levels it was before. It does seems businesses aren't hiring yet, which is another nice way to return the money to the common-folk.
Yup. Employment is down but I'd argue that there are other reasons for that. Lending is down a bit, but not as much as you might think. You can still buy a car or a house if you want. Also, I suspect you are unaware just how much lending goes on between banks and businesses all the time. You don't see it, but it does have a huge impact. Even if they're not hiring as many people, those businesses are still making products. That's kinda critically important to a healthy economy.
Like I said, there are two sides to the coin. Unfortunately, the political left tends to ignore one side and pretend it doesn't exist. The right treats both equally. You need both demand *and* supply for a healthy growing economy.
Share if you have something? Or perhaps have a better example of this money coming back into the system, again economics isn't my thing.
A better example? No. A better approach than attempting to take money from one place and put it somewhere else? Don't do that. Because another negative effect is that people tend to not want their money taken from them. If they think that it'll happen, they'll tend to *not* engage in the activities which result in their money taken away. Remember when I said that all taxed money by definition is not idle because we tax economic activity? Well, what do you think happens if we raise tax rates on an economic action (or even threaten to)? People will shift their money away from the things we're increasing the taxes on, right?
So while you may transfer X amount of dollars from one part of the economy to the other, which at best breaks you even, you may lose several times X dollars in money that actually does "leave the economy". It's really not worth it and it's more harmful than it helps. The solution is to *not* do that. But right now, we have spent this money not via direct transfer as we've been discussing, but by borrowing that money. So every player in the economy on the supply side is looking at this and working on the assumption that their taxes are going to go up. Why are we surprised that they are choosing to put their money into other areas?
That's how money leaves the economy. We don't get it back by taking it via a transfer process. We actually end out chasing more away. It's counter productive. I'd explain the ideological reasons why this is done and how they outweigh the economic factors, but that would be a whole thread by itself. Suffice it to say the decisions the Dems have been making in terms of spending and borrowing have *nothing* to do with economics.
I've been over-fixating on this private-sector debt thing for a while. Just can't shake the idea that while our government may have a terrible financial mess on their hand, they still aren't anywhere near as bad off as the private sector at the moment. Normally I'm into looking for a pretty good return on investment from a government program, or at least a compelling enough social cause, but I don't know at the moment. As much as everyone is complaining about run-away government spending, at least they're doing some spending right now.
As I said before. Spending is not the only economic activity. Unfortunately, there's a whole side of our political spectrum that does everything it can to make people think this, but it's not true.
I just can't stress this enough. You need to let go of those assumptions you've been taught. You're only looking at half of the real economic picture.
What I'm looking for is for the private sector to stop paying down debt, and start putting a larger percentage of their income into consumer goods.
Why? I get that you've been told that this is bad, buy can you say why? To me, it's good for the private sector to pay down debt. It's not like when they do this that the money disappears. One of the bigger problems right now is that we have too much private debt (as you stated). By paying it off, it frees that capital to be lent out again. This creates economic stimulus just as surely as more people buying things in stores does. But no Democrat will ever admit this, not because it isn't true from an economic standpoint, but because it counters their social agenda.
Until that happens I'm wondering how much the government should do in the meantime to minimize the downturn. I suppose it's a drop in the bucket compared to GDP, and I'm not convinced they really have the leverage to make things much better or worse.
They should stop looking at things they can do, and stop doing the harmful things they are doing right now. Again, you're unfortunately repeating completely false assumptions about economics. It's because of those false assumptions that we're in this mess to begin with, and we wont get out of them until we realize that government is not the solution. Government is the problem.