Tuesday, July 21, 2009

Right lesson, wrong application

Beautiful piece of ad hominem in the Wednesday Voice section of the Tracy Press.

Usually, such hackery doesn't merit a mention in this space, but deserving of special attention because of its ubiquity in current political discourse is this excerpted sentence:

Historically, increased government spending has never led us out of a recession.

A lot of folks, who are rightly concerned with the federal government's ballooning debt, have argued against increasing Obama's already-sizeable Keynesian stimulus plan, as the president and many economists have suggested.

These government-spending skepitcs point to the case of Franklin D. Roosevelt and his New Deal, saying that it was World War II, not FDR's extensive social spending that pulled the nation out of the Great Depression.

But what was World War II if not a massive dose of government spending?

(Side note, John Maynard Keynes lamented that FDR did not spend enough during his New Deal and argued that the Depression would have ended sooner if FDR hadn't curtailed government spending in the mid-1930s in response to concerns that he was too much of a spendthrift.)

WWII shot spending through the roof. And on the other side of the war, America's economy soon became the envy of the world.

Keynesian economics — which entails spurring the economy through government spending — is the right thing to do in lean times, when the government is the only entity big enough and rich enough to spur the economy.

Where Keynesian economics hits a wall and ceases to be useful is during times of growth and plenty, when the private sector is more than capable of carrying the economy. Problem is, past generations continued to run up huge deficits in times of strong private-sector growth, expanding the national debt when it should have been reduced.

Deficit-hawks are exhibiting a case of right lesson, wrong application.

We need these tight-fisted folks around when the private sector is booming to reduce government spending. But right now, we need the government to keep us afloat.

1 comment:

Jamie said...

Hey Jon - awesome blog! You should join us for a blogger meet-up next Wednesday at Valley Brew for some free food and a chance to meet and greet with other local bloggers. Hope to see you there! www.recordnet.com/blogmeetup