Spending money to help an overspending problem?

I've been against Obama's idea of spending loads of money to help the debt crisis, but something happened that made me kind of rethink it. I played a demo of an indie Democracy game where you run a country that has a debt problem. In order to fix it quickly, I had to spend a bunch of money to start programs to increase revenue, and increase spending on some things to get rid of problems.

So does that make me wrong. On one hand, it workes. On the other hand, what I did made a pretty dramatic change. Something big enough that there was a very noticable change over the course of a few years. I have heard that things are getting slightly better thn they were before, but obviously many people are still unhappy with Obama.

So maybe spending money in itsself isn't a bad idea, but more like spending it in the right areas. I don't know if Obama's been doing it, or if any game can be realistic enough to compare to real life. what do you guys think?

I'm actually quite horrible on economy, but I think a lecturer once summed things up like this: "For a single country, the ideal economic situation is when everyone spends money, while you keep yours." In an essence, from what I've come to understand, it's generally healthier for the economy - nationally or globally or what-have-you - when money flows, when people spend money. It's better for everyone to spend money rather than everyone saving. And, in a sense, I guess the idea of "return on investment" shouldn't be lost on too many people.

I'm honestly not too sure whether the current administration is spending money "in the right places", but I'm generally of the opinion that - unless you support Ron Paul and want America to be isolationist - you need to spend a certain amount of money to sustain a healthy economic system.

It all depends on how you frame the problem, is it a spending problem or a revenue problem?

Increases in spending during a recession can help the economy by keeping the average worker on the job and consuming. However, that increase in spending has to be offset by an increase in revenue (higher taxes for the wealthiest for example), that has not happened so its no wonder that the US is deeper in debt.

Also the ways in which the US wastes money every year (wars in foreign countries, agricultural subsidies for multibillion dollar corporations) doesn't help.

is it a spending problem or a revenue problem

The budgetary issues of the United States has, since the Reagan years at least, always been a revenue problem.

The United States is notorious for implementing programs and then dismantling tax revenues for political gain.

And while it is arguable that there are areas of over-spending in the American budget, the government would have a far smaller problem on their hands if they spent less time trying to cut and more time looking for revenue.

Just refer to your basic rule of Economics, which is Supply and Demand. When you are in a boom (high amounts of spending) you increase tax and lower Government expenditure (roads, bridges, etc.). By doing this it decreases the amount of spending among people which will move away from a boom. You may think that a Boom is good for the economy where it can actually be worse then a recession. When the customer demands more and more, it causes the supply to limit which will inflate prices so that the supplier can still make his money back on his goods.

However, in a recession (I assume you all know this) you do the opposite. You lower taxes and increase Government expenditure. By doing this it is influencing people to spend more and more money. Which in turn stimulates the economy as it is giving money to other people, who will go spend that on others goods and the cycle continues creating work in the economy and eventually leading out of a recession.

Overall, a Boom leads to higher employment, but also higher prices. Where as a recession leads to lower prices but lower employment. That is why the government uses stimulus packages and taxes to try and keep a state of equilibrium.

When you are in a boom (high amounts of spending) you increase tax and lower Government expenditure (roads, bridges, etc.).

Except in America, where you lower all taxes, all the time.

Originally Posted by Raistlin

Except in America, where you lower all taxes, all the time.

My apologies. I am clearly Australian.

Originally Posted by Fatrat92

My apologies. I am clearly Australian.

No it's clearly my fault. I assumed you were talking about the United States.

I was talking more in general.

If a balanced economy is on the end of many roads, American politics can be summed up as a bunch of people arguing about which specific road to take, claiming the others don't go anywhere, when the real problem is that nobody is willing to travel the entire distance.

Spending money to make money is economics 101: That's how businesses work.

The fact that all these ardent "capitalists" who insist that the government should be run like a business refuse to let it do things that every business does every day is, I feel, rather telling.