Government Stimulus Is the Best Way to Get Out of a Recession

Before I begin, I would like to mention that I just discovered that the positions in this debate are mixed up. I should be con and my opponent should be pro. That should address the structure problem we've been having. I. Capital AccumulationMy opponent's entire refutation rests on ideas that I already cautioned against in my opening round. To sum it up, saving helps restore the line of credit, the loss of which was the cause of the recession to begin with. It's not like money that is saved is not used in the economy: "It is simply channeled elsewhere than into consumer goods. Financial institutions that accept such deposits lend them to customers who invest in their businesses. This is the process of creating the capital that is the sine qua non of sustainable, long-term economic growth. "[1]My opponent is right in arguing about decreased consumption and lower wages, but, as I mentioned in the last round, that is required for a healthy recovery: "Recovery also requires the freedom of wage rates and prices to fall, so that the presently reduced supply of capital and credit becomes capable of supporting a larger volume of employment and production. " In other words, while in certain terms, some economic statistics trend down because of saving, they are all necessary in the end for a strong economy afterwards. [2]What my opponent is committing the broken window fallacy again - you can see what immediate consumption rewards. The apparent problem with saving is that you can't immediately see the rewards that it brings. However, that doesn't make immediate consumption any better of a fix for a recession than saving is, and as I think you can tell from my arguments, saving is better, because again, it is not only the immediately seeable consequences that are the ones you should judge your policy by. II. Broken Window FallacyAs I've explained numerous times, the best solution is the one that take into account the long-term effects and every conceivable consequence. But I don't think I have to retreat my argument to that. As I've also explained numerous times, saving puts more capital into the economy, whereas government stimulus does not: "The starting point for the government and its dependents is an act of consumption, which means a using up, a loss of previously existing wealth in the form of capital. .. any fresh production and employment that results [from government stimulus] is incapable by itself of replacing the capital that was consumed in starting the process. "[2]For, ". .. the government's 'creation' of jobs via public works programs (or any number of stimulus-driven enterprises) it does so at the expense of the tax-payer via higher taxes or inflation and that 'spending' which would have otherwise gone to new fridges or iPads is removed and this does nothing to significantly improve aggregate demand. " In other words, while saving puts money into the economy, all stimulus does is spend money that was already in the economy, making the stimulus worth pretty much nothing to the economy. Government stimulus cannot create wealth. [3]III. Empirical EvidenceAmerica may be bad because of its already large amounts of debt, but it's somewhat a consequence of the government stimulus over the years. To begin, there is evidence that lower savings rates lowers recession recovery: "America’s personal savings rate declined some 56 percent over the past 50 years from 1963-2012. .. From 1960 to 2007, the U. S. economy had seven recessions, and the annual rate of growth of real GDP during the 12 quarters following these recessions was 4.2 percent. .. In contrast, during the 12 quarters following the trough in the second quarter of 2009, the average annual rate of growth of real GDP was 2.2 percent. After three years of recovery, the cumulative growth of real GDP was 6.3 percentage points lower than the average value for the earlier post-1960 recessions. " So higher savings rates help economies get out of recession quicker than low savings rates because saving puts capital back into the economy. [4]As for debt, while debt is also bad in the long term, debt is also bad in the short term when in comes to economic recovery: "Recent research confirms the dangers posed by high levels of government debt. Reinhart, Reinhart, and Rogoff examined over 110 years of economic data to conclude that advanced economies whose debt levels reach 90 percent of GDP face much slower economic growth. In 2009, Carmen Reinhart and Rogoff wrote This Time Is Different, a book The Economist called “a magisterial work on the causes and consequences of crises stretching back 800 years. Their conclusions were based on a vast new accumulation of cross-country data, covering 66 countries across all regions of the world and spanning eight centuries. This dataset made it possible to study country debt episodes and crises much more comprehensively. Reinhart, Reinhart, and Rogoff’s recent work on the impact of high public debt on growth and interest rates is based on this groundbreaking dataset. "[5][6][7]In other words, there is empirical evidence that higher savings rates and lower debt rates help an economy to recover faster from a recession than lower savings rates and higher debt rates. Debt is bad not only in the long term, but in the short term (affecting the current recession) as well. ConclusionOverall, government stimulus does not and cannot create capital. Saving is the best thing for restoring the line of capital that caused the recession, and therefore will bring the economy back on track. Government spending just reappropriates what was already being used to revive the economy. Sources[1]: . http://www.fee.org...[2]: . http://mises.org...[3]: . http://www.zerohedge.com...[4]: . http://mises.org...[5]: . http://www.heritage.org...[6]: Reinhart, Reinhart, and Rogoff, “Public Debt Overhangs. ”[7]: . http://www.economist.com...