We are told that massive deficit spending, interest rates driven to zero, and now higher taxes on the "Rich" will bring the American economy out of the doldrums or whatever fake malady seems to be popular.
Stimulus Spending and the Cantillon Effect But let's get back to the main point: Whether or not the US economy is underperforming, can government spending help? That has been the mantra since Keynesianism swept the economic and then government hallways shortly after World War II. So, we may ask ourselves, just how does government stimulus spending work? Well, from what I can conclude, the government sells its debt to the Fed, spends it on all kinds of programs, some of us get more money in our pockets and spend it.
We can see that, from government's perspective, spending is the key.
More spending MUST mean that the economy is doing better.
The implied mechanism is that more spending via money created out of thin air somehow draws more goods out of hiding.
Wow! What would you do? You might spend a little time thinking how to spend the money, but sooner or later you will take your suitcase of money and start to spend.
Rather than enticing production out of hiding, government stimulus spending has caused a transfer of wealth from the later receivers of new money to the earlier receivers of new money.
Government must spend only what it raises in taxes or obtains through honest borrowing in the bond market.
Tax reductions will take money from the destructive power of government spending and increase the capital accumulation power of the private sector.
Government can help the economy only by protecting you and your property.
A free market economy, limited government, and the rule of law are the keys to prosperity and peace.
https://mises.org/power-market/government-spending-cannot-stimulate-economy
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