Jim Devine asked, "what's wrong with the 'stimulus package'?" I begin by rejectiing 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 being necessary. 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. On Sun, Dec 14, 2008 at 4:03 PM, Jim Devine <[email protected]> wrote: > Sandwichman wrote: >> At a moment when the entire spectrum of bourgeois stupidity and cowardice is >> breathlessly [??] embracing the magical "stimulus package" nostrum, one >> might imagine that a "left" would be eager to develop a critique of the >> prevailing idiocy. Instead, many of those [unnamed individuals] who style >> themselves "on the left" reveal their thinking to be simply the left flank >> of bourgeois stupidity.< > > So, Tom, what's wrong with the "stimulus package" _per se_? Let's > examine it (remembering, of course, that at this point, it's > fictional). > > * It involves Keynesian fiscal stimulus of the demand side in a time > when monetary policy has largely lost its power. Even without the > supply-side stimulus, it creates jobs and income via the multiplier > effect. > > * If a major part of the program goes to "revenue sharing" with state > & local governments, it will prevent the current cut-backs in social > services, education, etc. from happening or even reverse the trend. > > * This demand-side stimulus will increase the markets faced by > business, encouraging them to do fixed investment (the accelerator > effect), which would have a further multiplier effect. In theory, > this fiscal expansion would also "crowd out" business investment by > raising interest rates. But if the US economy is indeed falling into > some sort of depression, this is precisely the time when what's more > important to business is the size of the markets where they sell > stuff, not the cost of finance. > > * If done right, it helps the "supply side" of the capitalist economy, > too: fixing old infrastructure that's decayed over the years (due to > neglect) and adding new infrastructure (and education and basic > research, etc.) help raise the ability of the capitalist economy to > produce in a few years. This is quite different from the wasteful > spending (Iraq, etc.) that has characterized the last 8 years. > > (If Obama and his economic advisers are smart (and their fans say they > are), this kind of spending will be done using a "capital budget" > rather than from a merged budget, where unlike the current budget, the > capital budget does not have to be balanced (cf. Robert Eisner's > work).) > > * If done right (as described by Obama's followers), this kind of > investment program would reduce the US economy's negative > environmental impact. > > * Any accelerator-driven fixed investment would also promote the supply side. > > I don't see why this is "stupid," but obviously there are problems: > > * It increases the US government's debt, adding on to the obligations > that Dubya accumulated. But if done right, it would also raise the > ability of the US economy to produce and thus the US government's > ability to handle the debt using tax revenues (without raising tax > rates). In any event, the increased government would correspond to > increased government assets, no? Unlike consumers, firms, or state & > local governments, the US government is not going to go bankrupt in > the near future (at least not during the next 20 years). > > * Much of the demand-side stimulus in the US would "leak out" to buy > imports. But the _world_ economy needs stimulus, doesn't it? Even > China is having problems. Also, a lot of countries outside the US are > also investing in infrastructure, etc., which would "leak out" from > their economies, some of it to buy US products. So it's possible that > a world-wide recovery could happen. > > * In theory, fiscal deficits cause higher interest rates, which would > raise the dollar exchange rate. Given the low interest rates that > monetary policy has imposed, this might be a good thing. Absent the > "safe haven" effect, the US dollar would have fallen drastically in > recent months. > > * A lot -- even 90% or 99%? -- of the infrastructural investment > might be "pork barrel" spending, helping the districts of influential > congresscritters and businesspeople but not helping long-term supply > growth. But if we're in a severe depression, maybe even building > pyramids is appropriate (as Keynes suggested) because it's the > demand-side stimulus that's most important. > > * However, building pyramids and the like (cf. Memphis, TN) might lead > to increased pollution, just as with normal growth of real GDP. The > "green" content of the program has to be emphasized. > > * The program saves capitalism, not humanity. It's not going to > produce socialism, to the utter disappointment of the maximalists. In > fact, without political pressure to counteract the prevailing winds, > it might not even have very equitable results. The steady rise in > inequality since the late 1970s in the US might stop, but it might not > be reversed. It's quite unlikely that the US will see any kind of > social democracy in the near future. > > * It does not reduce individual hours of work per year. But in the > current situation, I'd guess that many people would rather work _more_ > hours, especially since there's no guarantee that higher pay per hour > will compensate for the reduction of hours. Faced with their severe > debts accumulated over recent decades, a lot would be interested in > more hours of work simply to reduce their debt loads. The program does > not seem to promise to end the US slide toward mass debt peonage. > > I'm sure that there are other flaws in the Obama program (especially > in practice) and I'd like to hear about them. > -- > Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own > way and let people talk.) -- Karl, paraphrasing Dante. > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > -- Sandwichman _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
