Changing the Narrative about Government Spending (1)
January 27, 2009 - 12:04pm ET
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John Maynard Keynes, the patron saint of the tried and true idea of government stimulation being the only way to reliably revive an economy in recession, once offered a famous quote to make the point that in a recession, any spending being better than no spending, or even delayed spending:
If the Treasury were to fill old bottles with bank notes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well tried principles of laissez-faire to dig the notes up again...there need be no more unemployment and with the help of the repercussions, the real income of the community would probably become a good deal larger than it is. It would, indeed, be more sensible to build houses and the like; but if there are practical difficulties in the way of doing this, the above would be better than nothing.
House Republican, reveling in the infinite majesty of his ignorance, begs to differ. One of the proposals in Barack Obama $825 billion economic recover is a plan to provide money to weatherize poor people's homes. Republican House Whip Eric Cantor, on the CBS "Early Show," said this whole "stimulus" business can't possibly work, because it won't create jobs, singling out the weatherizing idea as just the sort of non-job-creating boondoggle he has in mind.
The logic is akin to saying that an anvil dropped on your head from a fourth floor window won't cause injury. But such are the intellectual dead zones Republicans have backed them into because of their blind fealty to conservative ideology. One of their biggest Big Lies is that "only entrepreneurs can create jobs." Spending government money, on the other hand, is no better than throwing cash down a hole—worse than that, in fact, according to this conservative "theory," because, as Keynes demonstrates, throwing money down a hole is not in fact an ineffectual way to revive a dying economy.
But weatherizing homes is better.
Re-read the quote above. One of the points Keynes makes is that with any scheme from the treasury to put money into the hands of ordinary working people during a recession is that "with the help of the repercussions, the real income of the community would probably become a good deal larger than it is." The technical term is the "multiplier effect": that money in the hands of those who will spend it straightaway (as opposed to money in the hands of business or the rich) quickly makes everyone richer. Debtors can pay their bills. Creditors can then pay their bills. Purchases long-delayed can be made; money flows like water; before long there is no recession any more.
In the land of conservative fantasy, where majik androids, not working people, weatherize the homes, such a thing is inconceivable, because "only entrepreneurs create jobs."
That being so, I have a modest proposal for Eric Cantor. Just as an experiment, let's immediately close five hundred military bases. According to his theory, there won't be any effect on the economy at all.
This week I'll be writing more about how conservatives (and even many liberals!) have brainwashed the public about how increased public spending works, why and when it's desirable, and what its attendant risks may be. Watch this space. Tomorrow we'll be recalling a name from the past: Wisconsin senator William Proxmire, who helped convince Democrats that there was always moral virtue in not spending a dollar—helping augur the day when an idiot like Eric Cantor can go on TV and say two plus two equals five and not get laughed at by the host.
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