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Spending: Good or Bad?

Here’s a letter sent today to the Washington Post:

You wisely criticize Sen. Schumer’s call for punitive taxes on Americans who buy Chinese goods (“Progress with China,” April 9).  In the course of doing so, though, you inadvertently reveal a confusion that infects discussions of today’s economic slump.

You write that “But China kept the party going by accumulating $2.3 trillion in reserves and plowing much of it back into U.S. bonds – rather than letting China’s currency appreciate freely and, in effect, forcing the United States to save more and consume less.  Post-boom, of course, it’s clear that the two sides pushed this arrangement beyond the point of diminishing returns.”  So you alleged that this recession was caused, at least in part, by Americans saving too little and spending too much.

But you also support “stimulus” spending.

If spending too much helped to get us into this mess, how will spending even more help to get us out of it?

Donald J. Boudreaux


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