Quote:
Originally Posted by texaspackerbacker
Government investment in infrastructure - the injection of income results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.
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Thank you, Bobblehead. Is this not exactly the description I have given of the Multiplier--several times now? Keynes may have limited the effect to spending on "infrastructure", but give me one good reason why the same should not apply to ANY money spent domestically--which, of course, becomes SOMEBODY'S income. The same, of course, applies to tax cutting, which also leaves more money in the hands of consumers and investors.
I guess first of all because keynes DID limit his arguement to infrastructure. Secondly I have made my own point several times, but here goes again.
If you tax the rich to give to the poor you simply change the owner AND stifle the economy by taking the money several steps away from the producer/job provider. It could get spent by the original owner just as quickly and in a more positive manner.
If you borrow the money to give to the poor it still has a negative effect. There is no way the effect of the velocity of money(which is what you describe) can make itself up in tax revenues, it can only stimulate a sluggish economy short term to be made up later when the economy is strong. It can also have negative effects on inflation, capital available, and/or strength of the dollar (if we print to repay).
Furthermore, keynes not only limited it to infrastructure, but also limited it to getting out of depression/recession. Both points I have made over and over. Remember, I'm not dismissing what you say out of hand, I'm simply saying that it is limited to these two uses/occasions.