Evolution? Hell, it would be nice to see a presidential candidate defend basic economic theory.

McCain's proposal of a government spending freeze to stave off a depression is like announcing a plan to nuke NYC to win the war on terror. It's demented. But McCain cannot be called on it effectively because both parties pretend (in public) to subscribe to bizarro-world versions of basic economics.

The two parties have, over the years, created two retrograde political versions of basic Keynesian economics. Democrats say government spending is stimulative. Republicans say tax cuts are stimulative. And both sides concede to the idiocy of accepting that balanced budgets are good for the economy in all instances. In reality, deficit spending is stimulative, whether accomplished through tax cuts or spending, and deficit spending is, at this point in time, essential to our economic health.

1) Tax cuts stimulate the economy. They do. It's a fact. don't fight it. (Obama's tax cuts are more stimulative than McCain's because they are aimed at the consumer, rather than the capitalist.)

2) Government spending stimulates the economy. Government spending can stimulate more or less than equivalent sized tax cuts. It depends on the spending. In the current environment the biggest advantage spending has over tax cuts is that money can be spent in such a way that it cannot be hoarded. Tax cuts for the super rich will, given current conditions, be hoarded and this not be nearly as stimulative, $ for $, as things like infrastructure construction projects.

3) Deficits matter. But they sure as hell do NOT matter when you're trying to stave off a depression. All whining about "taxpayers" and "burdening future generations" is freep-level gibberish that is surprising to see on DU. If you are facing the threat of deflation there is no deficit too big, no amount of money-printing too extreme.

I know it's too much to ask, but just once I'd like to see a candidate, when asked, "How will you pay for your proposals?" say, "deficit spending, of course."

The thing is that who gets the tax cuts determines how stimulative they are. Tax cuts to the ultra-wealthy do little to help the economy when there is no incentive for those people to create jobs here. Tax cuts to the working class are seen in the economy right away because that money is spent. But they must be coupled with real wage increases so that those people also have some incentive to save and invest. Personal savings is in the negative range now.

You're right!

I guess the only problem is that we are so far in the hole now in terms of our deficit, that it seems unthinkable to many to go even further in debt. I know in general though, you are right. Do the principles change, though, when we have already spent so much and are so far in debt as it stands? I haven't gotten to that chapter yet. Maybe it's in an advanced course? :)

Nations need to have some national debt to keep the system percolating, but GIGANTIC national debts are a problem... usually.

But in an environment where assets are deflating the fear of inflation strikes me as misplaced.

Recession is bad.
Inflation is worse.
Deflation is fatal.

So I think normal standards of prudence do not apply whenever deflation is a real threat. Others might disagree.

He proposed allowing people to withdraw 15% or 10k without a penalty. Do you think this is a wise proposal?

It takes money from hoarding and puts it in the hands of spenders.

This is something that I had considered doing. Wasn't sure if it was a wise thing to do.

But its good for an economy that needs its wheels greased a little.

The Republican mantra is "tax cuts for the wealthy stimulate the economy"......... they're hooked on Reaganomics.......

The effectiveness of Reaganomics is certainly arguable. But instead of beating a dead horse, why not beat Republican arguments with solid facts?

The FACT that is ALWAYS overlooked, either willingly or ignorantly, is that when Reagan entered office the top tax bracket was 70%.

In that case I think it was entirely correct to cut taxes on the wealthy. There was a LOT of room to cut.

But now, the highest tax rates are no where near pre-Reagan levels. You're not going to get Reagan-esque economic stimulus from the Republican proposals because it is impossible to to get anywhere near Reagan-level tax cuts.

A 3% tax cut is never going to equal a 30% tax cut. I think even Republicans can grasp that kind of math. And I think Republicans will have a hard time arguing against that kind of math.

However, McCain conveniently ignores that Hoover was trying to achieve the same goal announced by McCain, a balanced budget in the midst of a recession. We are in the midst of the most severe financial crisis since the Great Depression. So, what does John McCain propose to do? He proposes to emulate Herbert Hoover by demanding a balanced budget in the midst of this crisis. Here is Encarta's discussion of the Great Depression:

http://encarta.msn.com/encyclopedia_761584403/great_depression_in_the_united_states.html

/snip

IV Initial Response to the Depression

The initial government response to the Great Depression was ineffective, as President Hoover insisted that the economy was sound and that prosperity would soon return. Hoover believed the basic need was to restore public confidence so businesses would begin to invest and expand production, providing jobs and income to restore the economy to health. But business owners saw no reason to increase production while unsold goods clogged their shelves. By 1932 investment had dropped to less than 5 percent of its 1929 level.

Convinced that a balanced federal budget was essential to restoring business confidence, Hoover sought to cut government spending and raise taxes. But in the face of a collapsing economy, this served only to reduce demand further. As conditions worsened, Hoover’s administration eventually provided emergency loans to banks and industry, expanded public works, and helped states offer relief. But it was too little, too late.

The epitome of a “self-made man,” Hoover believed in individualism and self-reliance. As more and more Americans lost jobs and faced hunger, Hoover asserted that “mutual self-help through voluntary giving” was the way to meet people’s needs. Private giving increased greatly, reaching a record high in 1932, but charitable organizations were overwhelmed by the enormous number of people in need. To many, government assistance seemed the only answer, but Hoover was convinced that giving federal relief payments would undermine recipients’ self-reliance, and he resisted this step throughout his term.

The tension between citizens seeking government action and Hoover’s administration came to a head in June 1932. More than 20,000 World War I veterans marched on Washington, D.C., to ask for early payment of government bonuses they had been promised. But the government refused, and when some members of the so-called Bonus Army didn’t leave the capital, federal troops used tear gas and bayonets to evict the men and their families (see Bonus March).

Hoover and most of his Republican Party firmly supported protective tariffs to block imports and stimulate the American economy by increasing sales of American-made products. In 1930 they enacted the Hawley-Smoot Tariff, which established the highest average tariff in American history. This was a crushing blow to European economies, which were already sinking into depression. Other nations retaliated by raising their own tariffs. This action helped to worsen and spread the depression by choking off international trade. Between 1929 and 1932 the total value of world trade had declined by more than half.

/snip

to make up for it so that we can pay for the deficit. That's the whole thing that is missing from the equation.