Recovery: A question of Supply or Demand
“The way out of this circle is to recognize that we only have the power to consume if we have produced and sold something in order to acquire the means to engage in consumption. Starting the analysis with consumption assumes one has already acquired means. Contrary to that analysis, wealth is created through acts of production that rearrange resources in ways people value more than alternative arrangements. These acts are financed with savings that come from households refraining from consumption.
If we want real stimulus, we need to free up producers by creating a more hospitable environment for production and not penalize the saving that finances them.”
I am not an expert, by no means on this issue. All I have to go by are my personal beliefs and my self-educated efforts and research. I do believe, however, that a supply sided plan will help recover the economy when compared to a consumption sided plan. Look at most “Stimulus” projects, they spend billions with little effect. Now compared the those outcomes to the rare times we have followed a supply sided recovery and we can see the effects of supply driven policies lead us out of recovery faster. Like I said though, just my opinion and not an export on the issue.