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There is plenty of shouting across the national aisle, false certainties on both sides, with Tea Partiers and their fellow travelers insisting that government spending is destroying the country, and some progressives insisting that public spending on social services and entitlement programs can never be a bad thing. Once again, the nation is embroiled in a false dichotomy of extreme views, with the real business of line-drawing lost in the process.
The real economic debate, the one we’re not having, is the one over what, precisely, are the costs and benefits of particular kinds of spending under particular economic conditions. Under what conditions and in what forms does government stimulus spending help or hurt an ailing economy? Does the apparent political inevitability of directing spending toward lower rather than higher short-term multiplier effects (funding too many languishing programs and too few shovel-ready projects) undermine it’s utility as a stimulus strategy? And, a historical favorite, did government stimulus spending end or prolong The Great Depression?
I’ll offer some thoughts on the last question: As this timeline (http://www.huppi.com/kangaroo/Timeline.htm) demonstrates, economic growth was very robust from 1934-1937: In 1933, when FDR took office, the freefall in GDP was brought to an almost complete halt, dipping only 2.1% (after falling 31% over the previous 3 years). In 1934, GNP rose 7.7%, and unemployment dropped about 3%. In 1935, GNP rose another 8.1%, and unemployment went down another 1.6%. In 1936, GNP rose another 14.1% (a record growth rate), and unemployment dropped another 3.2%. In 1937, GNP rose another 5%, and unemployment fell another 2.6%.
According to one argument, the one that 2008 Nobel Prize Winning Economist Paul Krugman subscribes to, Roosevelt, seduced by these years of phenomenal success in his program of economic recovery, was persuaded to reduce spending and focus on balancing the budget in 1937, driving the nation back into recession. According to the counterargument, it was the spending itself which resulted in the 1937 economic downturn.
But the one piece of evidence that seems to be most consistently disregarded is the one upon which virtually everyone agrees: WWII definitively ended The Great Depression. And just what was it about WWII that accomplished this feat? The fact that it was the most massive public spending project in world history, with enormous deficit spending in the production of heavy industrial equipment that kept getting conveniently blown up and needing to be replaced, a stimulus package far larger than any that could otherwise have been politically accomplished. And one whose success, along with the foundation laid by New Deal policies, set the nation on a path of decades of enormous economic growth.
Those who argue that it wasn’t New Deal spending, but rather WWII, that ended The Great Depression are not demonstrating with their evidence that government stimulus spending is inefficacious, but just the opposite, and that it needs to be truly massive to be truly effective.
Okay, folks! Have at it. I’ve invited professional economists to join this discussion; I hope I have some takers.
As the child of a small business owner, I understand the challenges that small businesspeople face, the risks they take, the long and hard hours they put in just to keep their head above water. Many work longer hours for less compensation than do some wage or salaried workers in other enterprises. Many large businesses, as well, struggle to survive, sometimes operating for extended periods at a loss. It is essential that we put over-simplistic concepts of class conflict behind us, and consider how best to thrive as a people, all in a shared enterprise.
But the disparity of wealth and poverty in the United States, far more pronounced than that of other developed nations, with far less social mobility (despite the myth to the contrary), is neither most conducive to maximizing our national prosperity, nor the best we can do in our quest to maximize equality of opportunity for all Americans.
Organized labor in America has been an essential force in ensuring that workers are treated as human beings whose interests and dignity matter, rather than just as factors of production who exist to enrich others. A basic sense of fairness dictates that those whose labor produces wealth benefit equitably from the wealth they have produced. In order to accomplish this, on the capital end, there needs to be a competitive return on investments, without which the jobs from which workers benefit simply dry up. The goal, therefore, is to ensure that there is a robust market economy producing competitive returns on investments, in order to create and maintain well-paying jobs and decent working conditions.
W should all strive to ensure that all Coloradans have the opportnity to thrive by their own efforts. This requires a robust economy framed by a legal structure conducive both to the success of businesspeople, and to the ability of workers to earn living wages and live high-quality lives. An economic climate friendly to investment, entrepreneurship, and the ability of businesspeople to succeed is essential to the interests of all Americans, whether wealthy or poor, whether employees or employers. But the purpose of that economic climate is to enrich us all, not just to further enrich the wealthiest among us.
We can do better, augmenting rather than reducing individual liberty in the process, but ensuring that it is the true liberty to thrive rather than the false liberty of denied opportunity. We must strive, as a people, to make sure that we are maintaining a political economy in which people work to live rather than live to work. We must strive to make sure that all working Coloradans can achieve financial security, receive affordable health care, and enjoy a modest pension in the golden years of life, without having to endure unbearable conditions or be strangers to their children in the process. These are reasonable and achievable goals, and we should all be fully committed to them.
