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« The neverending story | Main | And now for something completely different »

Mar 13, 2013

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Lex

Military Keynesianism isn't quite a joke, but it's far less effective than the civilian kind. And to the extent we need to be spending more government money, it's on human and physical infrastructure, not weapons.

polifrog

Interestingly enough, unless we become a pervasively militaristic nation, military Keynesianism will continue to be the only type of Keynesianism that works for those localities that are on the receiving end of military spending. But then, that would be the case when funneling dollars from the many to the few.

By contrast the civilian version of Keynesianism funnels dollars from the many to the many. It's a bit like giving yourself $10, only you give up $10, get $9, and the feds charge you $1 for their services. No one benefits but the federal government from "civilian" Keynesianism. In fact, the economy in my example would be 10% poorer.

Government is a cost.


Andrew Brod

I suppose it's useless to point out that if "military Keynesianism" works, then so does "civilian Keynesianism."

polifrog

I believe I pointed out the distinction.

Can individual localities be stimulated by outside dollars? Yes. That is because "military Keynesianism" is not pervasive on the spending side.

Can all localities be stimulated by national spending? No. That is because "civilian Keynesianism" (social programs for example) is pervasive on the spending side.

Said another way:

National taxes can stimulate local economies, as dollars are brought in from outside those local economies.

National taxes can not stimulate national economies, as there is no outside from which to bring the dollars.

Andrew Brod

There is no distinction.

polifrog

Why not?

Andrew Brod

You seem to think that non-military government spending doesn't benefit local economies.

To a first approximation, in a depressed economy there's no difference between federal dollars going to military families in the form of pay and federal dollars going to unemployed people in the form of unemployment benefits. There's no difference between federal dollars paid to build base infrastructure and federals dollars paid to build civilian infrastructure.

polifrog

There is a big difference.

Military dollars go to specific localities. Social program payouts, however, are spread much more uniformly (by way of population) across the US.

For example:

== A classroom of 30 could each donate $1 to a single individual. That individual would become $29 richer as a result.

That would be much like Fayettville benefiting from Fort Bragg while Greensboro does not. While each city pays its share of military expenses, only Fayettville becomes richer as a result.

== But what if that class decides that each individual needs a leg up and chooses to donate $1 to each individual within the class? In such a case each individual would be exactly $0 richer. Add government as the go-between and the end result is that they would each have become poorer.

That would be much like the nation's social programs in which no concentrations of wealth result. While money does indeed change hands, the private sector as a whole becomes poorer after the government takes its cut. The result is no net benefit.

We can not have a nation of "Fayettvilles". There must be a greater number of "Greensboros" than "Fayettvilles" for every Fayetville.

Andrew Brod

In your example, faulty as it is, military spending is more redistributive than non-military spending. And government spending creates "concentrations of wealth." Are those really the points you want to be making? I thought those were bad things.

In reality, of course both kinds of spending are redistributive. Military spending is redistributive in both geographic terms and -- given the socioeconomic characteristics of those who enter the armed forces and of the regions in which military bases tend to be located -- socioeconomic terms.

However, the issue at hand is not military vs. non-military spending as a general matter, but specifically as a mechanism in a depressed economy. And in a depressed economy, it matters little why a family in Fayetteville receives money that it can turn around and spend. All that matters is that it receives it and spends it.

I suppose it's commendable that you're effectively acknowledging the logical flaws of those politicians who argued against economic stimulus until cuts in military spending became imminent. But the answer is to not to create a new and illogical school of economics in order to fit your preconceived pro-military notions. The fact that Colbert agrees with you should tell you something.

Andrew Brod

As for me, I don't want to see cuts in military spending right now, but neither do I want cuts in unemployment benefits or anything else. Now is the worst time to cut government spending.

So to those who want a smaller military or smaller government in general, those are perfectly reasonable objectives to pursue in a normal economy. But not now.

polifrog

Ah, now I see where I were my logic is off. Actually not, but then all that was said was that my example was faulty...

But if you believe military spending benefits Greensboro, Raleigh, Charlotte, Ashville, and many others as much as it benefits Fayettville then it is unlikely you could have produced a logical argument that concluded as much. In such cases it's best to just skip the logic and make the claim I suppose.

Andrew Brod

I don't believe that. I just got done noting that military spending has geographically redistributive effects.

polifrog

Perhaps more consideration should be given to agreeing so begrudgingly as to be misread.

Lex

Frog, civilian spending can create the foundation for private-sector wealth and prosperity, as we have seen in everything from the TVA and the interstate highway system to NASA and the Internet. Right now, parts of many municipal water and sewer systems, including Greensboro's, are a century old and in dire need of upgrades. Potholes need filling. We need faster Internet to match that of our global competition. And that money is not coming from the private sector.

Your perception of the lack of benefits of civilian Keynesianism when we're stuck in a liquidity trap, as we now are, is, to be charitable, difficult to believe.

polifrog

For 5 years we have been immersed in a depression that rivals the great depression and have responded in similar fashion. Massive government spending.

Yet you point to the TVA, interstate highway system, NASA (now devolved to a Muslim outreach program) and the internet, debatable at best, but even if we accept the myth that government created the internet.... Why do you have to go back 50 years to find suitable examples of government work projects when the past 5 have been a perfect opportunity for such projects?

To make the point even more clear, why do you have to go back 50 years for such examples when the nation has spent trillions of real dollars to "jump start the economy"? Where is the today's TVA? Did we not get anything for those trillions of dollars?

But I am making a larger point. Let's take the TVA, for example. When we think of the success of the TVA, we think of those south eastern localities that benefited from the influx of TVA construction money and later the fruits of that construction, not California, not Arizona, or New York.

In that way TVA spending was much like military spending that benefits the Fayettvilles of our nation, spot spending supported by a broad base of taxation.

By contrast, most government "civilian" spending has lost that focused element. Consider our social services - a broad base of taxes and a broad base of spending and we are all worse off for it.

Well, except for the bureaucrats.


Lex

Frog, the "massive" spending has been less than half that needed to make up the GDP gap. The reason deficit spending worked in the Great Depression was that it was on a larger scale more suited to the size of the problem. Until 1937, of course, when premature worries about the size of the deficit led to spending cuts and, duh, another recession. And the deficit spending of WWII was Depression spending on steroids.

I also would point out that not all infrastructure spending need be geographically targeted. Faster Internet everywhere would benefit everyone. Better education everywhere would benefit everyone, particularly because people are mobile.

And we are not "worse off" for social spending. Johnson's "Great Society" reduced the poverty rate by half. And as spending on social programs has been cut (or reduced relative to growth in the eligible population), the problems, predictably, have rebounded.

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