Economics

During the past week, seeing governments in Canada and the United States pushing big deficit spending plans as an intended cure for recession, I've solicited explanations of the logic explaining this "cure".  As usual, I'm skeptical but I'm open-minded.

I emailed a group of friends and relatives, expressing my view that:

1.  Governments can't "spend their way out of recession", but by such spending will hurt the economy and slow the pace of the natural recovery.

2.  Nonetheless, some will argue, once the economy recovers, that the spending was the cure.

3.  The only logical explanation I see for government spending during recession is to combat the psychology of "hunkering down".

4.  However, I think extending the logical analysis shows that this can't work since the government can't create the wealth it redistributes.

5. Instead, the government can only take wealth from you (so to speak) to give to me (so to speak).

6. It can take this wealth by taxing you and so leaving you with less, or by printing money and so reducing the value of yours.

I also noted that I am not trained as an economist or experienced in finance.

The current Canadian government is the most nearly conservative Canadian government during my 14 1/2 years here. The current US government is the least conservative US government in my adult life (and some would argue ever). Both the nearly conservative Canadian government and the least conservative US government now propose massive spending as an economic "stimulus" package.

I would be cynical enough to believe the Obama administration and Democrat majorities in Congress view the "crisis" as an opportunity to achieve pre-existing goals of paying back constituencies and increasing government's roles in the economy and the lives of citizens. As Rahm Emanuel recently elucidated, "You never want a serious crisis to go to waste". But that would not explain Stephen Harper's government following a similar path.

Another question is, if we're willing to run massive deficits, why not cut tax rates? Why not eliminate taxes for a year? Wouldn't that spur innovation, entrepreneurship, and hard work, and so increase productivity and end the recession?

Under these circumstances and given these questions, I thought "I know bright people with a variety of training and work experience, holding a variety of political views, living in various parts of both countries. Maybe an email to them will yield some interesting ideas and information."