Wednesday, March 24, 2010

All across our land, state, local governments and school districts are laying off employees and shortening their work week. How can we educate our children for the modern world by reducing spending on education?
This is nonsense. We do not have to do this. The Federal government should be spending more financed by borrowing interest-free from the Federal Reserve as I have outline in previous posts.

Japan Fiscal policy

Japan has a very aggressive approach to turning around the recession.

The record budget, worth $1 trillion, for the fiscal year starting in April will pay for Prime Minister Yukio Hatoyama’s ambitious stimulus agenda, including cash handouts to households with young children, free tuition at public high schools and income support for farmers.

Mr. Hatoyama, who heads the Democratic Party, is looking to bolster both Japan’s deflation-stoked economy.

“Creating a virtuous circle in which a growth strategy spurs employment and demand will help combat deflation,” Mr. Hatoyama said.

Hatoyama understands how the economy works. In contrast, we are closing schools and laying off teachers.

Wednesday, March 3, 2010

Jobs Bill

A Kentucky Senator held up the extension of unemployment benefits for hundreds of thousands of the unemployed. Why? He said he was worried about the public debt. He wants to reduce spending elsewhere. This makes no sense. When you have unemployed resources there is no real cost to public spending. No opportunity cost forgone. What is needed is an increase in spending, not substituting one expenditure for another.
When consumer demand is inadequate to use all resources, it is not the time to reduce some people's income. The barrier to full employment is the outmoded way we finance public spending with borrowing incurring interest payment obligations. Money is created when banks make loans, if commercial banks do not want to do because they are pessimistic about the economy, the government's own bank, the Federal Reserve, could loan the treasury enough to get nearer full employment. (For more, see some of my earlier posts.)
Sen. Bunning finally relented and voted for the bill, but he and no other politician is looking for a new means of finance.