02.19.09

If spending is the only option

Posted in Society at 16:12 by RjZ

Like many people, whether they call themselves libertarians, or are (understandably) uncomfortable associating themselves with a bunch of gun nuts, I don’t trust government all that much. I expect people to do what they can to take care of themselves and see no reason why some small group of elected officials would be better entrusted to that task than the people themselves.

As a result, I often subscribe to the “starve the beast” theory of government. The idea is that we can make government, that is, the beast, smaller by limiting its nutrition: money. In light of recent events, I think I may have to give up on this plan. The beast is so large, and people love the handouts so much, that there may be no effective diet anymore. First, Bush spent $700 billion on poorly managed bailout funds, and now Obama has signed up for another $800+ billion. Amazing.
Far from being a tax-and-spend liberal, Bush was a don’t-tax-and-spend ‘conservative.’ Obama is stacking up to be the same, offering huge spending programs coupled with tax cuts. At least his spending will go for something other than missiles…but where does the money come from?

If we’re going to spend all this cash, so much that the next generation, and the one after that, will still be paying on it, then shouldn’t we be getting something for it? As well as starving the beast, which looks ineffective, although perhaps we’ve never really tried it for real, tax cuts are supposed to stimulate the economy. The idea goes like this: let’s give money to the people so that they will spend it on things that they decide is best rather than having government decide for them.

I certainly like that concept but it has a few obvious flaws. First, individually, people aren’t likely to get together and build something for future generations to enjoy and profit from. After all, that’s who they borrowed that money from. Regardless of our intentions, it’s hard at $8/week (that’s what our tax cut is shaping up to be) to gather enough people to go out and build a bridge or a museum. Governments tend to be better at this sort of thing, simply because the money is pooled together for bigger projects. Secondly, it assumes that people will actually spend the money wisely. Here too, I am glad to trust individuals alright, but how can we expect people to spend $8/week? The incremental influx of cash appeared to have limited effect when Bush tried it last year, and if it drives people to Wal*mart, because that’s all they can afford, then all we’re really doing is sending the money to China for cheaper goods.

I can’t say I share the opinion that it was a good idea to spend more than a trillion dollars, but given that the nation seems so bent on doing just that, I can’t agree with the tried and not true conservative approach of tax cuts (the don’t-tax-but-spend-anyway method). Perhaps we ought to have something to show for all that cash.

Or do we want to tell the next generation that back in 2008 and 2009 we spent over a trillion dollars and mortgaged their future; but hey, we were able to afford a flat screen television or a GPS for the car. I hope they’ll be understanding.

2 Comments »

  1. Tim Rohrer said,

    February 21, 2009 at 10:10

    Ron, you make some good points. But the real problem is the gridlock in Washington, which led to the compromise that allowed both parties to claim ideological victories. The Republicans in the Senate insisted on tax cuts to go along with spending, while the Dems were forced to accept this fiscal irresponsibility in order to get their ideological goal accomplished–a Keynesian injection of spending into a troubled economy.

    Even though I am convinced that some form of government spending is called for under the present circumstances, I do agree that that money could be more wisely spent. I agree that the central problem with this stimulus bill is that there is no underlying vision for building any new infrastructure that might actually reshape and stimulate the economy, such as there was with Al Gore’s National Infrastructure Initiative (ie, the commercialization of the internet) or his dad’s road-building (ie the Interstate Highway System).

    A better proposal might have been to have massive and visionary investment in energy infrastructure, such as installing metered electrical outlets across the nation in an effort to encourage plug-in hybrids and all electric vehicles, for example. Others have suggested that we needed to purchase those foreclosed homes and turn them into residential mental care facilities, hospices, assisted living homes, halfway homes, public housing and other social goods (although I personally don’t agree with this idea). Instead there seems to be some elements of everything in this bill.

    While I don’t have an easy answer as to what that vision should have been, I know it wasn’t there. And that. more than anything makes me believe that this bill was a band-aid that won’t do much of anything good.

  2. RjZ said,

    February 23, 2009 at 9:24

    Indeed, this is the true first test of Keynesism! The fundamental question for economists should be “will Keynesian injection of cash solve the economic crisis” but “is there really a crisis?”

    Simply put, couldn’t this mess also be seen as a correction? I think yes and that it would spare future generations an unwieldy burden if others would join this, but then out elected officials wouldn’t have anything to do.

    That’s for another post, but I don’t think gridlock would be such a problem. The government does way too much already.

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