Can we spend our way to prosperity?

A few years ago, researchers discovered that most people driving on highways in blinding fog, drive much faster than they can see ahead, and even some people actually drive faster. When it comes to debt some exhibit the same behavior: debt is increasing, but we don’t slow down life, somehow like the fog, we think we will eventually drive through it.

California is the perfect local example of this. Governor Jerry Brown announced over the weekend that California’s debt of $16 billion is double what they thought is was going to be. Going back 10 years in California’s governorship Governor Gary Davis nearly bankrupted the state through over promising and overspending.

The United States and many other countries continue to increase spending and borrowing, driving faster through the fog, instead of taking the painful path of austerity that I wrote about previously of cutting back. This path would be difficult in the short run, but is the only solution that in the end will revive economies the world over. There is simply not other way, and the longer we delay the harder the path back.

Voters though aren’t convinced. We elect leaders that promise to provide the things we want, and most of us are not willing to have cuts to their particular project or program.

It is interesting to watch what is developing in other countries. France recently elected the socialist Francois Hollande because he promised to tax the rich and take care of everyone. He stood opposed to any austerity programs. We are seeing the same battle in Greece. Is our Fall presidential election going to be about social or economic issues? Is it going to be about taking care of entitlements programs and no cut backs for anyone and higher taxes, or austerity, business growth and employment?

What ever happens it will be great political theater, but more importantly, what are we doing with our own personal budgets, have we looked at our balance sheets lately? It might be good to do from time to time, to see if we are driving in the fog and need our own austerity program.

4 thoughts on “Can we spend our way to prosperity?

  1. Alan Acker says:

    This is not the time for austerity. It is a timing issue. To have government seriously cut back spending when consumers and businesses also are not spending, is a recipe for disaster. Government needs to cut back, but only after consumers and businesses have recovered enough to have sufficient capital flowing in the economy.

  2. Mark Gilbert says:

    Christopher Dicky? Really? Please see Krugman, Paul, and Keynes, John Maynard.

    1. Kent says:

      Correction Francois Hollande

  3. Kent says:

    There are a lot of arguments and theories against austerity during recessions, I agree with some of them, however I would like to see spending in areas that focus more on job creation and growth. We can’t forget a national debt nearing $16 trillion, people want to see elected officials sharpening their pencils and being strategic, but all we see is politics.

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