empty vessel
Member
See . . . I think we had the opposite problem. There was too much money flowing around as people invested in all sorts of crazy internet start-ups. I was there, I had my own. A lack of money was not a problem, a lack of good businesses was the problem. But it sounds like you approve of Bush's moves to fix the economy . . . he massively cut taxes and thus "put money back into the economy". I find it quite amusing to see you on the same side of George Bush in economic matters!!
I'm pretty sure even you agreed with George Bush in the sense that in a recession the government must put money in the economy (stimulus). The government can put money back in the economy either by cutting taxes or spending, which are equivalent activities. Bush correctly moved to increase aggregate demand, but he exploited the situation on behalf of the wealthy by spending mostly on rich people (inequitable tax cuts that increased income inequality). Were it me, I wouldn't have cut taxes of high income earners but would have spent more on poor people instead. This would have (1) increased aggregate demand most efficiently; (2) reduced income inequality; and (3) substantively helped raise the living standards among Americans. Win-win-win.
You say that a lack of money was not the problem, but the data show otherwise. The domestic private sector was literally operating in the red as soon as the government started running surpluses in 1998. Indeed, this is an accounting truism (provided that the trade balance is zero or negative, as it was). That is precisely what the chart I posted reflects. In short: Domestic Private Balance + Domestic Government Balance + Foreign Balance = 0
To help understand why the private sector must run a deficit when the government runs a surplus (assuming a zero or negative foreign balance), see: http://neweconomicperspectives.org/2011/06/mmp-blog-2-basics-of-macro-accounting.html
See also: http://bilbo.economicoutlook.net/blog/?p=961