|Jim Devine asked, "what's wrong with the 'stimulus package'?"
I BEGIN BY rejecting your premise, Jim, that it "involves Keynesian
fiscal stimulus... [and] creates jobs and income through the
multiplier effect" First, it's not "Keynesian" and, second, it doesn't
"create jobs". Of course that reverses the order of importance of the
two aspects. And, frankly, if it worked, I wouldn't care if it was
Keynesian or not. It just won't work.
What's wrong with the program, then, is, one, IT WON"T WORK, two, its
inevitable FAILURE will be used to lend ideological support to the
subsequent draconian "restraint" package and, three, it is yet another
instance of TRICKLE-DOWN economics.
But why won't it work? Because fiscal policy doesn't operate in a
vacuum. With the exception of four years at the end of the Clinton
administration, the U.S. government has been running substantial
budget deficits for 30 years. The U.S. economy has evolved all sorts
of levers to maximize the rent-enhancing rake-off from this activity
and minimize the job-creating by-product. Every dollar expropriated by
"management fees" is one less dollar in wages.
The "job creation" in an economic stimulus package is implicit, not
explicit. Although some job creation from a multi-hundred billion
dollar spending program is unavoidable, it has become the prevailing
management conventional wisdom to minimize employment outcomes
whereever possible. Sure, you could bring in rules, in conjunction
with a spending program, that seek to maximize employment outcomes.
But you could also do that directly, without any new spending program
Now this isn't to say that there are not things that the federal
government should be spending money on, such as universal health care.
Only that they don't have to be funded by deficit spending as a
"stimulus package". They could be funded by higher taxes on the
wealthy, for example. If they are being marketed as "stimulus" then
odds are that's because the rich will be given a pass on tax
increases. So you were saying you're for continuing the Bush tax
give-aways to the rich, Jim? Trickle-down by any other means would
stink as much.
What amazes me is that the same people who so distrust the
Clinton-slant of the incoming Obama personnel seem pretty sanguine
about the emerging stimulus package consensus yet dismissive or
hostile to an anti-growth, environmental sustainability argument. I
call this the "growthodoxy". It seems to me that the seismic fault
line lies between economic growth and environmental sustainability.
This is not to say that ALL economic growth is environmentally bad,
just that aggregate growth in rich countries, TODAY, is net bad
(ecological foot prints and path dependency and all that). Progressive
policy has to pick and choose among growth elements and oppose growth
for growth's sake. The argument between "fiscal conservatives" and
so-called Keynesians is simply what is the best way to achieve growth.
When the good cop so-called Keynesian strategy fails the fiscal
conservatives will be there with the bad cop supply-side panacea of
corporate and capital gains tax cuts.
Coming back to Keynes, we most certainly have arrived at (or far
beyond) the point where "wise consumption" and working less would be
his policy prescription. I hesitate to mention this because in the
past you, Jim, used this observation as a launching pad for a display
of erudition about Alvin Hansen's stagnationism, Keynes's lack of
prescience about military Keynesianism and the views of the old New
Keynesians of the 60s about wages, hours and employment. Well, I don't
care about that shit because my argument is not based on whether or
not Keynes was right. The stimulus package crap, though, is based on
textbook models that are neither faithful to Keynes nor coherent in
their own right. It is doctrine that has evolved into dogma.