Nicky Cheese

In the following 53-minute video, Heritage’s Brian Riedl astutely debates Center for American Progress’ James Kvaal, taking the con position on Obama’s spending-stimulus plan.

Very impressive exchange overall – especially on the part of Riedl – and I really recommend watching it all, but, if you can’t, I found the most revealing section right at the beginning (1:19), where Riedl effectively deconstructs a regurgitated Keynesian tenent that, as Kvaal himself demonstrates, just won’t die.

Kvaal:

The problem that we have is that families are cutting back to just the necessities. So they’re reducing their spending. Businesses are then cutting back on their employees; they’re cutting back on their own investments. That leads to families pulling back more. So you have a vicious cycle where the economy is producing far less than it’s capable of producing. And what we need to do is aggressively step in now and cut off that vicious cycle. And the only actor capable of doing that is the government.

[...]

Reidl:

…The basis for that statement is that: consumer spending is down, therefore demand is down. But the whole concern about consumer spending assumes that consumer spending is the only spending in the economy. The result is: if I’m not consuming money, I’m saving it and if I’m saving it, I’m using it to pay down debt, or invest it, or put it in the bank. Well, that all gets spent too because banks lend out the money to other people to spend. When you pay down debt and when you invest it, that gets spent as well. So the idea that: if people aren’t spending money, they’re saving it – that somehow that’s leaking out of the economy and needs to be replenished by the government, I don’t agree with because people aren’t storing their savings in mattresses. They’re paying down debt, investing it, or giving it to banks who lend to others to spend.