Paul Krugman wrote this piece in the NY Times yesterday, and my cousin sent me the link. It's a keeper, and I posted it on Facebook, with the comment that I couldn't have put it better myself, which was undoubtedly part of why I don't have a Nobel prize in economics.
That led my friend Bart to reply; "not really a starve the beast guy, eh?", which set me off on the following rant:
"No, not so much. I think that the mantra that government can't work is most often proven by those who repeat it, and I think that putting people in charge of government who disagree with government on principle is a great recipe for regulatory disasters (see Wall St, BP), the "privatization" of priceless public assets at fire sale prices, and the pillaging of the public purse by ideologues and opportunists (see Blackwater, Halliburton, Jack Abramoff, etc., etc.)
Apart from that problem (in case that's not enough by itself), I notice that advocating for "starving the beast" has NEVER actually reduced the deficit by so much as a nickel, because those who get elected chattering about how bad all these government programs are realize they will be voted out of office in a heartbeat if they actually cut those programs the public finds both useful and efficient. Consequently, when those "deficit hawks" get elected, the only real policy prescriptions are tax cuts, and the national debt immediately explodes.
Finally, as Krugman alludes to, cutting government spending during a recession is a spectacularly stupid thing to do from a macroeconomic standpoint. When aggregate demand is low because everyone is worried about keeping a job, cutting taxes on those who do have jobs does very little to stimulate the economy and does nothing to provide for either our economic future or those who are suffering now.
We have huge structural economic problems in this country, including (but not limited to) dangerously outdated and failing infrastructure, an abysmal energy drain on our economy, and most important, a balance of payments problem that will sink us if we let it. Significant parts of those problems can be laid at the feet of those who have spent the last thirty years encouraging us to cut our taxes instead of paying our bills.
Recessions are when sane governments spend money to prime the pump, but not on tax cuts, which return about half of what they cost to the economy. Unemployment benefits, by contrast, produce about 150% of their cost in economic activity, and investments in solving the aforementioned structural problems have multipliers that are even higher in the long term.
Uncle Sam can still borrow cheaply (the T-bill rate is relatively low, historically speaking), but as Krugman says in his piece, that won't be true forever, particularly if the rest of the world becomes convinced that we're borrowing to make it easier to concentrate wealth in progressively fewer hands, and not to invest in things that will drive long term growth.
Those private interests that have been the beneficiaries of all that tax cutting have done little or nothing to invest in the broader public welfare, and we're in danger of turning the most productive and egalitarian society in history into a banana republic. Lenders don't think much of banana republics - they tend to send their national wealth out of the country, instead of paying their debts.
We've had neo-Hooverite, militarily adventurous, tax-cutting "disaster capitalists" in charge for much of the last thirty years, during which time, in the absence of a clearly defined military enemy, our military spending has tripled and the rest of our bills have gone unpaid, so that the wealthiest among us can get orders of magnitude wealthier. That's the "beast" I'd like to see starving, before it completes the job it's begun of wrecking our economy, and teaches a new generation what a "Hoover flag" is."
See, no Nobel prize...
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