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 spending—as some are advocating right now.
[Snip]
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.
[Snip]
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 ...
Agree.
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, that’s $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.
William Flax
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
http://www.cbn.com/cbnnews/finance/2011/June/IMF-to-UK-Cut-Taxes-to-Boost-Economy/
“Economics Of A Sociopath.”
That’s perfect!
“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.
Untrue.
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.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.