{"id":362,"date":"2011-06-22T16:07:03","date_gmt":"2011-06-22T20:07:03","guid":{"rendered":"http:\/\/jparnell.com\/blog\/?p=362"},"modified":"2011-06-22T16:07:03","modified_gmt":"2011-06-22T20:07:03","slug":"government-spending-and-job-creation","status":"publish","type":"post","link":"https:\/\/battle4liberty.com\/?p=362","title":{"rendered":"Government spending and job creation"},"content":{"rendered":"

Economist Alan Blinder wrote an op-ed in the June 21 Wall Street Journal<\/em> entitled, “The GOP Myth of ‘Job-Killing’ Spending.” He opened by citing Keynes\u2014no surprise here\u2014and then stated the following: 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.<\/em> Without getting into the specifics of the piece, I am challenging his central thesis. Contrary to Blinder and Keynes, government spending is not <\/em>the appropriate response to high unemployment, and it\u2019s not difficult to understand why.<\/p>\n

Let\u2019s start with one crucial point: Government dollars must <\/em>come from the private sector, sooner or later<\/em>. Government cannot spend unless it first (1) confiscates it in the form of taxes, (2) devalues the currency by printing money, or (3) incurs debt that we (or our children) must pay down the road. Understanding each of the possibilities is the key.<\/p>\n

In the first instance, government is merely spending what would have been spent in the private sector; there is no increased demand to \u201cstimulate\u201d the economy and create jobs. Put another way, government spending $10 on paperclips might help the office supply industry, but the $10 a taxpayer doesn\u2019t have to spend on a movie ticket will hurt the entertainment industry. Unless government spending improves efficiency in some way\u2014building a critically needed road, for example\u2014Washington is merely substituting our spending with its own, complete with the political paybacks and bureaucracies that must be created to oversee it. In almost all cases government spending produces less bang for the buck as well. Would you rather spend $10 on your own or ask someone in Washington to spend it for you?<\/p>\n

The second instance is just like the first because the $10 bill government prints is offset by comparable inflation\u2014a reduction in value of existing currency. The money is your pocket or in your 401(K) is worth less, a whole lot less when this is done on a large scale. Financing government spending with the printing press is an insidious form of taxation. You don\u2019t see the money taken from you, so you are tempted to believe that you\u2019re getting something from Washington for nothing.<\/p>\n

In the third instance, government can create jobs in the short run<\/em> by spending money it does not have, thereby creating the need for more labor and additional hiring. This is the crux of Keynesian philosophy: Government must intervene when the economy is in a slump to get things moving again. The problem here is that the jobs created are not sustainable, unless you plan to borrow forever. Don\u2019t laugh\u2026this appears to be the strategy of many on the left, although most would agree that the bills must be paid at some point, ostensibly by \u201cthe rich.\u201d Just take a look at the massive national debt and you should see the folly in this argument. Politically speaking, borrowing to ease the pain of current economic adjustments is doomed from the beginning.<\/p>\n

So how can Keynesians like Blinder actually argue for more government spending as a solution to high unemployment? The answer lies in two assumptions. First, Blinder assumes that government is smarter than you are. If left to make your own financial decisions, you just might not spend it wisely. Instead, government can \u201cinvest\u201d in education, technology, healthcare, and so on in ways that \u201cgrow\u201d the economy. There might be a kernel of truth in this statement in limited instances, but the political process makes implementing such a top-down approach unworkable. It just creates more bureaucracy, debt, and dependency.<\/p>\n

Second, Blinder assumes that government is actually capable of managing the economy. Even if economic models were reliable predictors, it is ridiculous to suggest that even the best minds are capable of collecting and processing the data needed to plan an economy. As Hayek put it, economics is about conveying to leaders how little they know about the world they think they can design.<\/p>\n

In the end, the issue is one of freedom. Are we best suited to make our own decisions or is government capable of managing our decisions more effectively? Keynesians like Blinder and Obama argue for the so-called experts in government. I\u2019ll put my money\u2014what\u2019s left after taxes at least\u2014on individuals making their own decisions.<\/p>\n","protected":false},"excerpt":{"rendered":"

Economist Alan Blinder wrote an op-ed in the June 21 Wall Street Journal entitled, “The GOP Myth of ‘Job-Killing’ Spending.” He opened by citing Keynes\u2014no surprise here\u2014and then stated the following: 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 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/posts\/362"}],"collection":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=362"}],"version-history":[{"count":0,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/posts\/362\/revisions"}],"wp:attachment":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=362"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=362"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=362"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}