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But they do have a connection to that shenanigans, at least to the extent that government spending does eventually "trickle down" through the economy. By propping up firms through direct fiscal injections and bailouts, they prevent the employees of those firms from losing their jobs. Those employees then continue spending, at least more than they would've if they'd been laid off. The businesses that receive that money do better than they otherwise would've, they make investments that they'd clamp down on if they perceived the economy was in the toilet, and that makes its way to technology startups.



On the other hand, the state has to levy more taxes (or crowd out other investments in the capital market), if it spends.


Well, in practice it never actually does levy more taxes for its spending, and the crowding out of the capital market is kinda the point, since firms cut their capital investments during a recession anyway.

In the long run, it'll be detrimental to the economy, because firms would otherwise shift their capital investments and the government's deficits and artificial support prevent that adjustment from happening. But in the short run - which I think is what this comment thread is talking about, since it's predicting another dip once the stimulus is withdrawn - it really does make for an improvement.


> Well, in practice it never actually does levy more taxes for its spending [...]

Sources? On the other hand, Germany and the UK have increased e.g. VAT in recent years.


Hyperbole.

But OTOH, you need only look at the spiralling U.S. govt deficit to see that just because they spend more doesn't mean that they'll raise taxes to cover it. Source on that:

http://en.wikipedia.org/wiki/Income_tax_in_the_United_States...

Since about 1960, the top tax bracket has almost uniformly gone downwards, as has the bottom tax bracket, except for a slight blip around 1989. We know what that did to Bush Sr's reelection campaign.


The USA is very special, because they happen to own the printing presses for the reserve currency of the world. Most other governments can't go that route for that long.




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