In a very weak economy, when you say 'cut government spending,' what you mean is you're laying off school teachers and you're de-funding various programs that put money into the economy. This means you have more unemployed people that then draw unemployment benefits and don't pay taxes.
Interpretation
Cutting government spending in a weak economy leads to higher unemployment and less overall economic support.
Fareed Zakaria highlights the paradox of cutting government spending during economic downturns. While such cuts are often seen as an attempt to balance budgets, they can result in greater unemployment and a contraction of economic activity, as essential services are removed and those affected by layoffs become reliant on unemployment benefits, thus exacerbating the very financial challenges the cuts intended to address.
In practice
This quote can be used in discussions about fiscal policy at a public forum.
But now, we are becoming suspicious of the very things we have long celebrated - free markets, trade, immigration, and technological change. And all this is happening when the tide is going our way. Just as the world is opening up, America is closing down.
It is likely that human beings will find fulfillment and will be rewarded for the same qualities that they have been rewarded for for 5,000 years. And that is intelligence, hard work, honesty, a sense of character, loyalty to family and friends, and above all, love and faith. If you are trying to decide what you should do, those are the things you should do. And you know it.
The Berlin Wall wasn't the only barrier to fall after the collapse of the Soviet Union and the end of the Cold War. Traditional barriers to the flow of money, trade, people and ideas also fell.
If you listen to the political discourse in America today, you would think that all our problems have been caused by the Mexicans of the Chinese or the Muslims. The reality is that we have caused our own problems. Whatever has happened has been caused by isolating ourselves or blaming others.
In the 1990s, we were certain that Saddam Hussein had a nuclear arsenal. In fact, his factories could barely make soap.
But as the arms-control scholar Thomas Schelling once noted, two things are very expensive in international life: promises when they succeed and threats when they fail.
The real and effectual discipline which is exercised over a workman is that of his customers. It is the fear of losing their employment which restrains his frauds and corrects his negligence.
That's why the American Recovery & Reinvestment Plan won't just throw money at our problems, we'll invest in what works
All systems are capitalist. It's just a matter of who owns and controls the capital -- ancient king, dictator, or private individual. We should properly be looking at the contrast between a free market system where individuals have the right to live like kings if they have the ability to earn that right and government control of the market system such as we find today in socialist nations.
Central planning didn't work for Stalin or Mao, and it won't work for an entrepreneur either.
Addressing the weaknesses of capitalism will require us, above all, to do two things: first, to take a long-term perspective, and second, to re-set the priorities of business.
I am in favor of high wages and agree that the higher the wages, the stronger the evidence of prosperity, provided (and that is the important point) they are so naturally, by the effectiveness of industry, and not in consequence of an inflated currency or any artificial regulation.
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