There is a fairly sophisticated debate in the economic community about the effectiveness of Keynesian, deficit financed stimulus. Jonathon Chait is apparently unaware of this debate and has decided that only mass ignorance on the part of Republicans could explain the opposition to the administration’s stimulus plan. His defense of the stimulus plan is not part of that sophisticated debate. It’s part of the unsophisticated, first grade, name calling debate. He has the gall to title his article, In Defense of Waste.
Republicans like to accuse Democrats of wasting taxpayer dollars and being condescending eggheads. But if President Obama’s economic stimulus fails to prevent a depression–and I’m not saying it will–it will be because he didn’t waste enough money, and didn’t spend enough time being a condescending egghead.
Let’s start with the egghead part. The stimulus bill is based on Keynesian theory, which I’ll briefly explain in the condescending manner we liberals so enjoy using. When we’re in a severe recession, good productive capacity goes to waste. Autoworkers sit home unemployed because nobody has money to buy cars, and cooks sit home unemployed because nobody has money to go out to dinner. The first thing for government to try is to reduce interest rates, to encourage businesses to borrow money to hire more workers and buy equipment. But, if interest rates hit bottom, then the government has to shock the system back to life by spending money directly. Say, Washington hires construction workers to build something, and those workers start buying cars and going to restaurants, and, after a while, the economy is running again.
I’ve got news for Mr. Chait. I have never thought of Democrats or anyone else espousing Keynes childishly simple view of the economy as an egghead. Condescending? Absolutely. John Kerry’s tirade on the Senate floor the other day about the evils of allowing individuals to invest in whatever they wanted is exhibit1:
If you put a tax cut into the hands of a business or family, there’s no guarantee that they’re going to invest that or invest it in America.
They’re free to go invest anywhere that they want if they choose to invest.
Oh, the horror. Can you imagine the chaos that would ensue if politicians actually let people use their money as they see fit? Surely, the citizens aren’t smart enough to invest without the guidance of someone with the financial savvy of John Kerry who made his money the old fashioned way – by marrying it.
Chait acknowledges that it is hard to spend so much money quickly and intelligently, but then assures us that it doesn’t matter:
…by emphasizing the worthiness of his spending proposals, Obama has allowed the debate to revolve around the merits of each project. Normal spending is judged on those terms–whether the goods or services justify their cost. The point of stimulus spending, by contrast, is simply to spend money–on something useful if possible, wasteful if necessary. Keynes proposed burying money in mineshafts, so that workers would be hired to dig it out. (Imagine what the GOP could do with material like that.) World War II was an effective stimulus that, economically speaking, consisted of 100 percent waste. If war hadn’t broken out, we could have enjoyed the same economic benefit by building all those tanks and planes and dumping them into the ocean.
It is hard for me to fathom the depth of ignorance in that statement. Is it really possible that Chait believes that wasting resources is the way to create growth? I don’t care what the economic environment is, waste is just that – waste. Does Chait really believe he occupies the intellectual high ground with a statement like that? And since he brought up war, if it’s so stimulative, why isn’t the economy booming right now? What an insufferable prig.
I find it interesting that Chait and others who are so sure of themselves feel obligated to leave themselves an out by saying, as Chait does:
But if President Obama’s economic stimulus fails to prevent a depression–and I’m not saying it will–it will be because he didn’t waste enough money, and didn’t spend enough time being a condescending egghead.
If running a budget deficit north of 10% of GDP doesn’t produce the expected results, I would humbly submit that your original theory has some holes in it.