Skip to comments.The GOP Myth of 'Job-Killing' Spending ("Right-wing" WSJ opinion)
Posted on 06/21/2011 11:07:03 AM PDT by Qbert
It was the British economist John Maynard Keynes who famously wrote that ideas, "both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else." Right now, I'm worried about the damage that might be done by one particularly wrong-headed idea: the notion that, in stark contrast to Keynes's teaching, government spending destroys jobs.
No, that's not a typo. House Speaker John Boehner and other Republicans regularly rail against "job-killing government spending." Think about that for a minute. The claim is that employment actually declines when federal spending rises. Using the same illogic, employment should soar if we made massive cuts in public spendingas some are advocating right now.
The generic conservative view that government is "too big" in some abstract sense leads to a strong predisposition against spending. OK. But the question remains: How can the government destroy jobs by either hiring people directly or buying things from private companies? For example, how is it that public purchases of computers destroy jobs but private purchases of computers create them?
One possible answer is that the taxes necessary to pay for the government spending destroy more jobs than the spending creates. That's a logical possibility, although it would require extremely inept choices of how to spend the money and how to raise the revenue. But tax-financed spending is not what's at issue today. The current debate is about deficit spending: raising spending without raising taxes.
In sum, you may view any particular public-spending program as wasteful, inefficient, leading to "big government" or objectionable on some other grounds. But if it's not financed with higher taxes, and if it doesn't drive up interest rates, it's hard to see how it can destroy jobs.
(Excerpt) Read more at online.wsj.com ...
Like what happened... in the mid-to-late 1990's?...
must be keeeeeeen-si-an.
These idiots are acting like we somehow have a lack of spending at the Federal and state levels. We are spending massively above the historical norm in percentage of GDP, and it is a literally boot on the neck of our economy. Whether paid for by debt or tax collections, it is a burden that is slowing the economy. This is inarguable.
No one is advocating spending zero. We need to refocus on the few things the federal government is supposed to do, cut a lot, and reform the entitlement programs so they are market driven.
Myth my ass!
Studying monkey love is a productive way to spend money in anybody’s book.
Common sense is not an abundant commodity on the academic level, if it was, this Princeton professor would deduce that in order to spend money, government has to take it from someone, and many times, that person is someone who actually creates a real job other than one paid for by someone else’s money. And that is how government expansion kills jobs. Simple enough for anyone except an academic.
Yep. And it’s as real as Bernie Maddoff’s “profits” all those years... until it all came crashing down the moment that people wanted their money.
I suspect the WSJ finds the biggest dolts it can to write the ‘liberal’ opposing editorials. They used to employ Thomas Frank for a weekly column.
“But if it’s not financed with higher taxes, and if it doesn’t drive up interest rates, it’s hard to see how it can destroy jobs.”
The economic ignorance is breathtaking.
Regardless of whether government spending can be traced specifically to “higher taxes”, government programs always, always, ALWAYS are at the expense of removing money from the efficiencies of even a relatively free market, where the rigor of competition ASSURES proper, judicious and productive use.
Gosh, can ANYONE get a column in the WSJ?
If the G spends $10 on computers, that’s $10 taken by force from a free thinking economic actor, and given to a government-selected computer vendor. Said vendor must be a disadvantaged transvestite Eskimo female. The G. will pay $10 for $6 worth of inferior computers, and half the money will be stolen. Simple fact — it is a PHYSICAL IMPOSSIBILITY for the G. to spend a single penny that it did not already take from the private economy. Or it can print it. Either way, not good. See my tagline.
Beg to differ. Not all government spending is inefficient or counter-productive. Neither does all private spending generate new wealth.
On average private spending generates more wealth than public spending, but it is by no means ALWAYS the case.
Let's not get hyperbolic.
Nothing is taken by force from anyone if the money spent was borrowed rather than taxed. And the $10 borrowed isn't going to hurt anybody.
Of course the cumulative effect of tens of trillions borrowed is well on the way to destroying our economy and possibly our society.
“Common sense is not an abundant commodity on the academic level...
Simple enough for anyone except an academic.”
I’ve always thought it had something to do with how jobs are “created” in academia. When the private sector wants to do anything, there is a maze of complexities involved (finding the right price for a product- not too high or too low, having the right number of workers to do the job- enough but not too many, factoring in regulations, taxes, future market conditions, etc.)
When academia wants to do anything, it’s simple: Raise tuition.
I was looking for “your” post.
This is exactly the answer -
government spending always always always takes wealth out of the inherent efficiencies of the free market and puts it into the inherently inefficient government sector.
Somebody should tell that twit that not everybody can work for the government.
If everybody worked for the local, state and federal government the tax rate would have to be over 100% to pay everyone and everything.
It is not the spending per se that is the culprit. It is the combination of (1)financing spending by borrowing and a concommitant devaluation of the currency, and (2)taxing the guts out of businesses and the productive elements of society to pay for the spending. Add in onerous, overbearing regulation/ enforcement, and you have the prescription that kills the goose that laid the golden egg.
Not hyperbole in the least.
The marketplace, allowed to function properly, is always a more efficient deployment vehicle for monetary resources. It is not even close.
You don’t have to believe me. Read up on The Austrain School.
Austrain = Austrian
When government employment increases the cost of government increases substantially. Add to this the factor that increased government employees inevitably means added government controls on the public sector and there is a double whammy effect on the costs to the public.
They are "macro" economists from Princeton: they reject the law of supply of demand.
Supply and Demand is not just a good idea, it is the law. The government demand for loans increases the price. Even if the price of money is low, it is higher than it otherwise would be. Secondly, taking loans from China helps China keep its currency price low: They keep the demand for dollars high because they can buy dollars with RMB and loan them back to the U.S. Government. This hurts U.S. manufactures who compete with the Chinese thereby costing us Jobs.
It’s pretty easy to see that Kenyanesian economics has been an utter failure over the last couple of years.
“If the G spends $10 on computers, thats $10 taken by force from a free thinking economic actor, and given to a government-selected computer vendor.
—...And the $10 borrowed isn’t going to hurt anybody.”
—It isn’t?? What about the US computer maker who wasn’t selected by the government? The government-selected firm now has (an artificially-induced) competitive advantage. They can use that advantage then to price out free-market competitors (among other things).
For commentary on what he apparently considers a "Just Society," "Social Justice"--Misuse of Term For What Is Not Social & Not Just.
Blinder, as Keynes, represents a parasitical ideology at war with the multi-generational upward quest of productive families; at war with the America that brought us to world prominence.
Government spending transfers wealth - period. Private spending is a result of wealth creation.
“It is not the spending per se that is the culprit. It is the combination of (1)financing spending by borrowing and a concommitant devaluation of the currency, and (2)taxing the guts out of businesses and the productive elements of society to pay for the spending. Add in onerous, overbearing regulation/ enforcement, and you have the prescription that kills the goose that laid the golden egg.”
Good points. I would just add that at some future time the spending will be the culprit as high taxes or inflation kicks in.
IMF to UK: Cut Taxes to Boost Economy
June 7 2011
“Economics Of A Sociopath.”
“Nothing is taken by force from anyone if the money spent was borrowed rather than taxed”
It will be paid back with interest (taken by force)- from our currently unrepresented future citizens.
Of course if it’s borrowed in bad faith with no intent to repay... you’re right!
Isn’t this just the “Broken Window Fallacy” writ large?
The WSJ felt the need to have a liberal professor write an opinion piece for some reason — and check out this logic by the author:
” Suppose we enacted a modest fiscal stimulus program specifically designed for maximum job creation. My personal favorite is a tax credit for firms that add to their payrolls, but there are other options.”
In other words, this guy looks at a TAX CREDIT and GOVERNMENT SPENDING. That’s liberal code for sure.
Of course "extremely inept choices" are out of the question when you have lawmakers passing 2,000-page bills that no one has read, and the Speaker of the House believes that the best reason for passing the bills is so we can find out what's in them.
The Austrian school never makes the claim that every private purchase is more efficient that every government purchase.
It says that the total purchases of the private sector are made more efficiently than if similar purchases were made by the government. Which is exactly what I said.
As an example of a really poor decision by a private actor, how about Time Warner’s purchase of AOL at the height of the boom. Value of purchase been dropping ever since.
You are out of your mind!!!! $10 borrowed MUST be paid back with $10 plust interest — taken by force.
And when the interest paid on that borrowing goes overseas there is no direct multiplier effect within this Nation’s economy.
Some government spending creates new wealth. For example, the interstate highway system greatly reduced the cost of movement of people and goods. This created new wealth. You'd be perfectly happy to say that an equivalent improvement in mobility by private actors created wealth. Why not by the government?
Not everything the government does is transfer payments. Some is a necessary expense, without which all other wealth would quickly vanish, or at least the creation of new wealth. LEO and the military, for example. Without them and the legal system there would be no infrastructure within which new wealth consistently be generated. It's a necessary overhead expense.
Is government spending normally a much less efficient way to generate wealth? Absolutely. Is it possible for a command and control economy to generate wealth anywhere nearly as efficiently as a more or less free economy? Of course not.
But even the most repressive economies often generate some "stuff," which you may or may not be willing to define as "wealth."
For example, in 1920 the USSR was devastated. Even the military was pretty thoroughly destroyed.
By 1939, at enormous cost and great suffering, Stalin and his buddies had created an economy and military strong enough to (eventually) defeat the Germans. In 1920 this would not have been even conceivable. So obviously the Soviets had created new "stuff."
Inefficiently and with great atrocities, but they still brought new stuff into existence. The USSR managed to stay in competition with the USA through the 80s. Obviously this would not have been possible had they never created any new wealth.
If you wish to discuss the point further, I'm your huckleberry. But first you'll have to define what you mean by "creating wealth."
We need only look back to the 1930’s to see how well government spending works in dealing with unemployment. Until WW-2, the US economy stayed in a slump as the government spent and spent and spent trying to jump-start the economy with borrowed funds.
The economy will grow and people will be gainfully (important word) employed when the government gets out of the way and lets the economy work.
This spending frenzy, this Keynesian approach is simply the financial equivalent of kicking the can of reality down the road. Works for a while, but at some point, you run out of other peoples’ money and wealth to steal. We are nearing that point, and all these idiots want to do is spend more.
It’s time to let the economy reset. It will be painful, but it will be over a lot quicker if the government (and some members of acedemia) quits trying to hide reality from the people.
For example, the interstate highway system greatly reduced the cost of movement of people and goods.
An excellent essay on creation of wealth by private versus public sectors.
When you have a quasi-monopoly, it is much easier to fleece your customers.
As it does with all private sector initiatives.
Look, I’m not saying government is always or even normally a more efficient producer of wealth than the private sector. I’m just pointing out that government provides many goods and services we would consider “wealth” if provided by a private entity. I see no reason why these same goods and services should not be considered “wealth” just because they’re produced by the government.
This is actually an argument to make government smaller. If it concentrated on those things only it can do, it could presumably do them more efficiently and produce more wealth in the process. Since it isn’t interfering with the private sector as much, the PS is also able to function more efficiently and generate more wealth.
Win/win. Except for those who think government spending and control is morally superior to spending by the private sector.
Big difference between the Roosavelt, Reagan, and Obama spending sprees. When Roosavelt and Reagan spent money things, useful things, lasting things were built. Dams, bridges, tanks, power plants, tanks, ships, airplanes. many of these are still in use today. What do we get for 0’s 3 trillion dollars? Not one damn thing.
Quite true. But the $10 debt is a charge on the future. It isn’t “taken away” from somebody today.
I guess this is one of the reasons I gave up my 40+ year subscription to the WSJ.
When a business buys computers for itself, it does so because it thinks that it will increase its net profit by doing so. When the business buys the computers for the government (through taxation and then purchase by the government) its net profit falls by nearly the entire amount of the computer purchase.
Hmmm. Let's see. Which one is better?
Why do you add the word “today”? $10 dollars of spending is ALWAYS!!! $10 taken by force. Period.
Johnny Maynard would be very disappointed in how his ideas have been misapplied.
As I understand it, items from his economic theories as to how public spending impacted the economies were utilized to justfy jump-starting a stagnant economy by a sharp-short bump in government spending.
These efforts were claimed to have produced some benefit and, like magic, a whole program of constant government “stimulas” came to be accepted despite its costs and lack of efficiency. The taxes to finance and/or the inflation to print-around that spending became big factors in making econimic cycles deeper and prolonged — the exact opposit of what Keynes would have proposed.