The debt hawks are to economics as the creationists are to biology.
As usual, some stimulus spending has been criticized because it is “wasteful” and doesn’t create jobs. Here are a couple examples published recently:
“ $1.9 million spent to photograph ants has created two jobs.. Other ant research stimulus projects: $451,000 has created one job, $276,000 created six one-hundredths of a job, and $800,000 created no jobs. The $144,000 spent to study the behavior of monkeys on cocaine created four-tenths of a job. To study why monkeys respond to unfairness cost $677,000 – and has created no jobs yet.”
I am reminded of former Wisconsin Democratic Sen. William Proxmire, who published his monthly “Golden Fleece” awards for what he considered wasteful spending. He often was criticized for opposing basic research he did not understand, for instance NASA, SETI and the Aspen Movie Map. Many worthwhile, federal research projects have been killed because some politician thought they were frivolous. This is especially true of basic research, where the ultimate benefits are yet to be determined.
The notorious Mansfield Amendment prohibited the Defense Department from carrying out “any research project or study unless such project or study has a direct and apparent relationship to a specific military function.” Such Congressional meddling in research virtually eliminates discoveries based on serendipity.
Whether or not you consider ant research to be wasteful, it is highly unlikely that $1.9 million created only two jobs. Let’s speculate on where that $1.9 million might have gone. Photographers, photographic equipment, rent, researchers, travel, computers, chemistry equipment – all of which helped various businesses and people. Then those businesses and people spent the money they received on things like food, clothing, shelter and transportation, all of which helped more people and businesses. And on and on and on. In a similar vein, the monkey research expenses were paid to people and businesses.
In short, when the government spends money, that money costs you nothing. (Taxes do not pay for the spending of a monetarily sovereign nation.) In fact, that spending adds money to the economy, and that money circulates throughout the economy, stimulating as it goes. Every time the federal government spends, people and businesses benefit, and in turn these people and businesses spend, which benefits more people and businesses. Ultimately, all federal spending creates jobs.
There always will be a politician who tries to look heroic and prudent, by pointing out what he considers to be wasteful spending. While state and local governments, which do not have the unlimited ability to create money, can spend wastefully, it almost is impossible for any federal spending to be wasteful, even in cases where the original expenditure seemed frivolous in some eyes. Even spending for the notorious Alaskan “Bridge to Nowhere” would have benefitted the economy by pumping money into the hands of people and businesses.
Good rule of thumb: The more federal spending, the healthier the economy. Reduced growth in federal spending has resulted in nearly every recession and depression, and increased federal spending dragged this economy out of the recession.
Rodger Malcolm Mitchell
http://www.rodgermitchell.com
No nation can tax itself into prosperity
#Monetary Sovereignty - Mitchell 
“Ultimately, all federal spending creates jobs.”
I understand that, but I don’t agree that this spending is all completely positive for an economy.
At what point do we get to 1) the government tearing down previous production to replace it with new production (counter productive), and 2) the government deciding how many nails, say specifically roofing nails, will be created each year so that other nails run out of supply?
If our economy is continually being crowded out by government spending before long we are no longer are free.
This isn’t an argument against MMT. This is an argument against Keynesianism and central planning.
Cut taxes, provide incentives for savings, create an environment of real production based on profits that are saved and then spent for more production, and not this credit propped, bubble induced, false economy that goes bubble to bubble with private credit defaults in between.
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There is a difference between central planning and government spending. The “bubble” as you call it, was not caused by federal central planning. If anything, there was a lack of government control.
I see no signs our government is “crowding out” our economy. Our single biggest problem today is lack of money.
Rodger Malcolm Mitchell
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My fear is that out of this mess, we will go down the road of central planning as our way to get out of this mess. Mere spending on ant photographs will not be enough, at least that will become the opinion.
Summer of 2012, we’ll be cheering the bulldozers and recking balls to tear down perfectly good, yet overpriced, houses and buildings. And in its place will be erected government housing used to help plan the future prosperity of communities.
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I agree that government spending creates jobs but it this stimulus always enough to create jobs?
if we look at what Keynes said in the General theory, we would understand that these profitble creation of jobs
are mainly in infrastructure as Keynes argued in Chapter 16 of the General Theory
“If — for whatever reason — the rate of interest cannot fall as fast as the marginal efficiency of capital would
fall with a rate of accumulation corresponding to what the community would choose to save at a rate of interest
equal to the marginal efficiency of capital in conditions of full employment, then even a diversion of the desire to
hold wealth towards assets, which will in fact yield no economic fruits whatever, will increase economic well-being.
In so far as millionaires find their satisfaction in building mighty mansions to contain their bodies when alive and
pyramids to shelter them after death, or, repenting of their sins, erect cathedrals and endow monasteries or foreign
missions, the day when bundance of capital will interfere with abundance of output may be postponed. “To dig holes in
the ground,” paid for out of savings, will increase, not only employment, but the real national dividend of useful goods
and services.It is not reasonable, however, that a sensible community should be content to remain dependent on such
fortuitous and often wasteful mitigations when once we understand the influences upon which effective demand depends.
Therefore, government spending is not always enough to create jobs and increase economic activity because let us say
for example that the economy needs specific amount to work effeciently, if the stimulus was less that what the economy actually
needs then cover and repair the broken fully just like how when poor countries receive aids to end poverty didn’t make them
rich.
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Insufficient stimulus is . . . insufficient. On April 9, 2008, I described exactly what should be done to cure the recession.
Pump enough money into a poor country and it will become rich, at witness the United Arab Emirates.
Rodger Malcolm Mitchell
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“All Federal Spending creates jobs”
…even in these two cases??
1. The cost of inflation (increase in money supply without a corresponding increase in economy. China is not happy that we are devaluing our currency by inflating it with all the spending.
2. What happens when USDollars cease to be the anchor currency of the rest of the world? When we “create” money via Federal spending, we are creating wealth around the world and devaluing many other currencies at the same time. As countries continue to de-synchronize to the Dollar, our ability to “Print by Federal Spending” will be incapacitated. Your idea is NOT sustainable.
You think LACK of federal spending caused recessions and depression, and that LOTS of federal spending rescued us? Your timelines might be convenient, but take a high-school economics class. Your diagnosis of cause implies you read about 3 sentences of history. There is no example of socialism that has EVER worked. You must be a professor at university?
Do you consider bailouts for States who can’t afford their state spending to be beneficial for the economy too? Why do we have taxes at all then, just let everyone retire and collect free checks from the new federal spending, NOT!
How did Federal spending not help out Greece, Ireland, or any other country that ever tried socialism?
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KF,
1. Federal spending creates more jobs than does federal non-spending. Federal deficit spending is what creates dollars. Where do you think dollars come from?
2. Our ability to create dollars became unlimited in August 1971. It has nothing to do with whether the dollar is what you refer to as the “anchor currency.” The currencies of China, Canada, Japan and Australia are not “anchor currencies,” yet these nations, being Monetarily Sovereign, also have the unlimited ability to create their currencies.
People have been saying our creation of money is unsustainable for more than 70 years. Back in 1940, the term was “a ticking time bomb.”
Later, that phrase became embarrassing, even for the debt hawks (the “ticking time bomb” never exploded), so in the early 1980’s they switched to “unsustainable.”I imagine, that word too, will prove embarrassing, as the government keeps on sustaining. Then, they’ll have to find a new apocalyptic to describe federal money creation.
I don’t know why you equate federal money creation with socialism, which describes federal ownership, not just federal spending.
Your comparison of Greece and Ireland, which are not Monetarily Sovereign to the U.S., which is, indicates you do not understand Monetary Sovereignty. Because Monetary Sovereignty is the basis for all modern economics, I suggest you read this page: Monetary Sovereignty.
Rodger Malcolm Mitchell
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If I were an elected representative, I would vote to end federal subsidies to oil companies. This is for two reasons: (1) they don’t need the subsidies and (2) we need energy independence.
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Those “subsidies are nothing more that tax cuts. I would increase so called “subsidies” to oil companies by eliminating all corporate taxes on all businesses.
Rodger Malcolm Mitchell
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Sounds good. In all honesty, my largest concern with oil is its effect on global warming. I would support stricter regulations against pollution.
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“The carbon fuels industry … has spent $500 million this year alone trying to convince the public they are solving [global warming] when they are in fact making it worse every single day.”
Source: Al Gore, speech at 2008 Democratic National Convention Aug 26, 2008
Yikes. Now I understand why most people’s inclination is to end oil subsidies.
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