The GOP Myth of 'Job-Killing' Spending ("Right-wing" WSJ opinion)

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.

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.

Well, I would contend that maintenance is a form of wealth generation or at least protection. If you don’t do the maintenance, the system stops functioning pretty soon and then you have a serious loss of wealth.

We are on the same page. My problem with the govt is that they think spending all this money now on the interstate system will generation jobs and wealth like it did the first time.

What is wealth? Again I will go with Adam Smith in that when you get done, it generates more wealth. It is not the item it self but how it is used. Computers can generate more wealth but can also generate more bureaucracy.

It is also related to maturity of a family or govt. When you have easy wealth available, you will spend it foolishly, it is the nature of things. One generation earns it, the next spends it.

I have studied farm records for 30 years. The one bottom line I have is cash flow affects mgt more that mgt affects cash flow. If cashflow is tight I make better decisions, IF I win the lottery tomorrow, I make poor decisions. Which leads to the next discussion, what is the difference between wealth and cashflow?

Still up here;

Transcript of Pelosi, House Democratic Leaders, and Economists’ Press Conference Following Economic Forum
http://www.realestaterama.com/2009/10/22/transcript-of-pelosi-house-democratic-leaders-and-economists%C3%A2%E2%82%AC%E2%84%A2-press-conference-following-economic-forum-ID06137.html

Speaker Pelosi. ...”I am pleased that we had the benefit of the thinking of Dr. Mark Zandi, Dr. Alan Blinder, Bob Kuttner, Heather Boushey, Bill Hambrecht, and Allen Sinai. You have their backgrounds. We will hear from them now.”

...Alan Blinder. I’d like to start with a short apology, which is I’m not going to run off from you, but I have an appointment across town at 1 o’clock so I have to leave in about 10 minutes. But what I want to say is this: the Congress and the Administration and the Federal Reserve have done already an enormously heavy lift in limiting what could have been a much worse economic outcome. That said, it’s pretty bad as it is right now.

On the consensus forecast, I’m a little bit more optimistic than Mark. My personal view is a little bit above consensus, but that’s a quibble. On the consensus forecast, the GDP is already growing, but jobs are still shrinking and are likely to shrink for a while yet and that makes it very hard for political leadership or for just economists to the extent that we talk to the public to persuade people that things are getting better because they don’t look like they are getting better when jobs are a) still so scarce and b) are even shrinking rather than arising. So for that reason, despite the fact that we’re looking at an absolutely horrendous long-term fiscal outlook, I, like Mark, and I think most of us around the table, believe that at least a modest, now this is where people will disagree, but at least a modest increase in the deficit is targeted very strongly on job creation. Not a scatter shot, but targeted very strongly on job creation would be appropriate.

I think this is a case where it is both good policy and good politics which you know is not always the case but in this instance it is the case. That said, we do have to be mindful of the long-run deficit problem. I have been taken recently in a number of venues to be quoting not quite correctly, paraphrasing St. Augustine who said something like, “Lord, make me chaste, but not just yet” We do need to become more chaste about the budget deficit, we do need to pay attention to the long-run fiscal hole, a lot of attention but in the short term, this is not the time to do it. 2009 and probably 2010 are not the times to do that.

One thing I spoke to the Members about knowing that it is very, very difficult to do, is to try to get some long-run commitment to greater fiscal responsibility while we are still trying to alleviate the job problem. I know this is a very, very difficult thing to do, I don’t think it is quite an impossible thing to do. I think it is really quite remarkable that this many Members of the congressional leadership show up and spend several hours with the likes of us, talking seriously about the economy. This little session we’re having right now notwithstanding, this was not a media event. We were behind closed doors and talking very, very frankly over a range of issues. I think that happens too little in Washington and it is a tribute to the Speaker and to the other Members that they took so much time out of their schedules to do this. I thank them.

Speaker Pelosi. “Thank you, Dr. Blinder”

“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.
—Uh...how is this spending paid for if not through higher taxes or borrowing (which raises interest rates)?”

I think he’s only looking at it in the short-term- that because, in his mind, Obama hasn’t “raised taxes” (even though he has in certain instances- the estate tax, for one) and because interest rates are artificially low, that everything should be hunky dory for creating jobs.

This of course neglects your valid point- at some point it will have to be paid back in some form, and it neglects to consider the dramatic currency devaluation that has occurred, which of course leads to rising commodities prices and eventually... job destruction.

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