Why the private sector NEEDS Government...

[damonm]

The latest GDP numbers are in and they aren’t good. It appears that first quarter growth was a paltry 1.75% (inflation-adjusted, annual rates). That’s not exactly what we need right now with 13.5 million unemployed and it’s bound to get worse. This is true because this slowdown was primarily a function of a decline in government spending and that’s something that both Republicans and Democrats are desperate to accelerate. We are well and truly screwed.
(snip)
In terms of the interrelationships, it’s very important to bear in mind that consumption and net exports generally follow the level of economic activity rather than cause it. By that I mean, when there is an economic expansion, household income rises and as a reaction they spend more money. And, when there is a recession, they have less money to spend. There can be exceptions, but generally speaking household spending choices are not the drivers of the economy, they are the result. They tend to reinforce the current trend, whatever it may be. Net exports are very similar in that they, too, follow the business cycle. When we are in an upturn, we have more money and buy more of everything–including foreign stuff; so imports rise and net exports fall. And when we are in a downturn, we buy less.

That leaves investment and government spending as the real engines of growth, and this is why I highlighted them in green. They are the forces that drive the business cycle rather than follow it. Businesses and the government together determine whether or not we are in rapid expansion or the depths of depression.

The rest at http://blogs.forbes.com/johntharvey/2011/04/29/why-the-private-sector-needs-the-government-to-spend-money/