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I question myself why it always amazes me on how economically ignorant we are as a country, but then I read articles (and comments) such as this, and it becomes crystal clear. The major fault with this article is it sounds like Paul Krugman wrote it (and that is not a compliment by the way). Krugman believes, as does Sullivan, in this magical 'circular flow' model of an economy, where as consumers spend less, there are less profits, and then less jobs, and it continues to get worse and worse. The solution? To have the government spend more (read: infuse more money into the economy). If this was the answer, why not let the government always infuse massive amounts of fiat currency (and deficit spending) into the marketplace, as we'd be ridiculously wealthy, right? Wrong. The circular flow model fails because of what 'true' economists (Krugman not included) know regarding capital goods. In layman's terms, we can think of it as TIME. Products take time to manufacture, and the capital goods that help make those consumer products take time, which throws a huge wrench into the Disney-dream-world circular flow version of an economy. And what helps create capital goods? Savings! That's right folks, when we consumers save money, it is actually a good thing for the economy.
We are in an economy that is correcting itself, and the sooner it is allowed to correct itself, the better. If, on the other hand, we have economists and journalists and talking heads continuously telling the masses that spending is patriotic and government bailouts and deficit spending are all needed, we are in for a long and horrible spell. If you need proof, look no further than the interference in the early 1930's to see what that led to.
