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The issue here is that a lot of people, Fred Wilson being among them, refuse to acknowledge that their view of the world is untenable even when the evidence clearly points to it. In this very post he lays out every reason why this stimulus package will fail, says his own friends are planning to take as much advantage as they can, but then remains committed to it. It’s dogma over reason.

That’s how these plans continue to get implemented even with no record of success. Because "have the Government give people money" is such an appealing idea that they simply can’t bring themselves to acknowledge how ineffective it is.

The true irony is that the part he hates, the tax cuts, are probably the only piece of this money that will actually get to the people this plan is designed to help (though I agree even that will be ineffective because any tax cut to the lower tax brackets is just going to get stuffed in a bank and saved for an emergency in this economic climate)

I agree. One question though: Why shouldn't people save their tax-cut-money? Given that they will not put it under their pillows.

The "New Deal" helped extend the Great Depression for 10 years

More on this, here: http://www.engdahl.oilgeopolitics.net/History/New_Deal/new_d...

Why eight years of Roosevelt economic policy produced such disastrous economic recovery results, is the crucial question. The answer appears to be that the group of men who advised the President on economic and social policy during the peace years of the Depression, were focussed on a broad social agenda, one of using the depression crisis to shift the United States from a market economy, which they contemptuously termed "laissez-faire capitalism," towards a State-dominated economy of central planning.

I think that most people don't understand that money spent by the state is directly(taxes) or indirectly(inflation) taken from them. That might seem crazy, but I've often had political debates with people, who had absolutely no clue about basic economics.

WW2. Nearly all the prosperity of the last 60 years can be traced back to innovations done because of the war. You have: computers, encryption, microwaves, radar, jetplanes, sonar, foreign oil sources, rockets, synthetic rubber, silly putty, many plastics, nuclear power, and widespread use of penicillin. In many of these cases, the technology existed before the war but was not cost-effective or reliable enough for general use. The war spurred development on these fronts enough that it opened vast new consumer markets after the war.

The irony is that the government was not trying to help the economy with WW2 spending. It was try to blow shit up, and avoid getting blown up. It just so happened that many of the innovations that were good for blowing people up were also very good at improving their quality of life later. So once we were done killing people, we had 60-80 years of prosperity.

We just need another genocidal maniac, and a few tens of millions of people to die. Then it'll be all better.

(Irony aside, a similar effect happened after the civil war: many innovations like railroads, oil refining, trench warfare, steam engines, steel-hulled ships, etc. were commercialised because of the war, and then led to 60-80 years of prosperity afterwards.)

Another big change: FDR stopped villifying and prosecuting business. If one studies investor surveys, the change in attitude and the corresponding measures of investor confidence are clear. That probably did at least as much if not more to bring the economy out of depression. The government may be big but it cannot match the spending power of several hundred million people.

Well it can, but it can't match the collective intelligence of them, and that's what ultimately matters. It's not how much you spend, it what you spend it on.

Without the war thinks might have been even better. Too bad WWI stopped the first age of globalisation.

I would argue than universal healthcare is a good candidate. By this table one might expect a drop in healthcare costs from 15% of the GDP to 10%, which is 700 billion a year:

http://en.wikipedia.org/wiki/Health_care#Economics

Most major innovations in life extending technology come from the US. I very highly doubt waste is completely responsible for the increased spending by % of GDP compared to other western countries.

Combined with the semi-evil precautionary principle in Europe, it is very important to keep this research alive.

So I'm very wary of changes in the current system that aren't centered around decreased regulation.

Could you explain more about what the 'semi-evil' precautionary principle means in practice? Many of the medical treatments I've been interested in, developed of late, have had as their proving ground Europe and South Korea. The American medical system seems a lot more conservative in some areas.

In my understanding, the growing trend is to distrust new technology until it can be proven to have no harm on, for example, the environment. That is a ridiculous standard. Of course, so is banning federal funding for stem cell research, so you're right about the American system being more conservative in areas.

Increased spending on medicine usually corresponds to measures that wouldn't be taken in more nationalized systems. Late stage treatment of diseases and proceeding with risky births are two examples.

It's this kind of spending at the edges that matters a lot for where money and research time is spent.

My big fear with a change that isn't deregulation is to remove this incentive. The accounting is obviously difficult. How much value to you assign to a technology that increases life expectancy for a certain kind of disease? If you're comparing %GDP, surely an increased survival rate has a positive affect on GDP. How can you possibly account for that?

Numbers like the %GDP spent on medicine and life expectancy takes the aggregate information in a dynamic system of 300M nodes and reduces it down to two numbers that don't mean much for any given individual. For me personally, I'd like to see more research into predicting ailments, individual funding of research to fight ailments that are likely, and much more out of pocket spending on day to day treatment. Unfortunately, the national dialogue consists of many people who have no trouble paying for medical care debating how much of other people's money they should spend on the mythical set of the uninsured.

Well, just one example: until last year, Red Bull was banned in France for health safety reasons.

"There is no historical precedent that I know of for government ever redistributing large amounts of money in a way that was good for the economy."

Totally. Just think where we'd be now if all that money hadn't been wasted on the interstate highway system.

Maybe we'd have a decent train system instead of having subsidized suburbia.

Or much cheaper private roads.