Silly Economic Plans

Via Kevin Drum, from Dylan Matthews

Second, the president should do more to help the American worker. He should establish a jobs program. Do the simple math: We are spending more than $110 billion annually in Afghanistan. Stop it. Or scale it back to the sort of covert operations and drone war that is warranted. Savings? Perhaps about $100 billion—per year. Use that money to create up to 5 million jobs at $20,000 each....Just as FDR did during the Great Depression, put these Americans to work in states, counties, schools, parks.

Even Drum considers this unrealistic, though for the wrong reasons (i.e. the evil Republicans in the House would never let us do it).  I have a series of thoughts on this

  1. FDR had low paying jobs programs in part because this was the only form of relief -- there was not welfare or food stamps or medicaid or unemployment or EITC or social security.  A $20,000 dig-a-hole-and-then-fill-it-in government make-work job would likely just displace about the same amount of other government transfer payments.  I can't see this doing squat.
  2. We are really going to kick-start the consumer market with $20,000 jobs?
  3. The Left needs to get its story straight on the stimulative effects of wars.  Democrats blame Bush for the current economy in large part because of his wars, and the author here implies that moving spending out of wars would be a net plus.  But Keynesians believe WWII ended the Great Depression and Krugman wrote just the other day that what we really need is a war with space aliens (I kid you not) to end the Great Recession.  So which is it?

By the way, I think wars are a total economic waste and drag on the nation.  Dedicating scarce resources to blowing stuff up is the worst possible use of capital.  However, diverting this into politically correct, politician-selected make-work projects is not really a lot better.

  • John O.

    War is a lousy use of capital, but the worst is pretending to create economic wealth by digging holes and filling them back up for the sake of employing. In War if your nation wins, you at least get some sort of spoils.

  • steve

    "The Left needs to get its story straight on the stimulative effects of wars."

    The left isn't monolithic. Examples of schizophrenia like this in the lefts standard talking points are just examples of where the fractures lie.

  • Noah

    Unlike FDR's day, there isn't very much, if any, pick and shovel construction work left in the US. Most every job of any type in the US has an associated capital expense.

  • Henry Bowman

    Of course, FDR really began pushing programs such as the WPA when he learned that 85% of the participants voted Democrat.

    Robert Higgs has argued for some time that WWII did not bring the U.S. out of the Depression. It did reduce unemployment, of course, as the military sucked up nearly 12 million people and "put them to work", often literally for a lifetime.

    I have never understood the idea that war was good for the economy. You build something (say, an aircraft), then send it into war where it often gets destroyed. This is good?!

    War is sometimes good for certain industries, but is almost always bad for an economy, especially in modern times, where plunder and looting by the victor is limited.

  • Johnson

    You folks have got to study up on MMT (Modern Monetary Theory)which will clarify this discussion. Check out Warren Mosler's blog http://www.centeroftheuniverse.com for starters and read his 7 Deadly Frauds pdf.

  • Dan

    Steve,

    Good comment. I agree.

  • Dan

    It seems like if we want to address unemployment, ending the war in Afghanistan isn't the best way to do it. Whatever one thinks of the war itself, it does employ quite a few Americans, including the 100,000 or so soldiers over there.

  • a_random_guy

    What people like this just completely fail to understand: the government cannot - absolutely cannot - create a single real job. If the government pays someone $20k to do something, that is $20k taken from private people and/or private industry. Money that would almost certainly have done more good where it was.

    Borrowing the $20k might be a realistic option if it were short-term borrowing, to be repaid as soon as times are better. However, the government has amply demonstrated that borrowing is forever - no one has any credible plans on the table to reduce the national debt.

    A "government jobs program" is a contradiction in terms.

  • caseyboy

    The Romans knew how to engage in economically beneficial wars. As a matter of fact they rarely declared war unless there was an economic benefit in sight. Go to war, fight the battles, annihilate the enemy at ANY cost, take the spoils and sell the population into slavery. Has a certain logic to it.

    Since it is no longer PC to conduct war in this manner, it is better to avoid them at ANY cost.

  • ParatrooperJJ

    I disagree. War is one of the best ways to accelerate technological innovation. The last ten years of war has accelerated our military technology around two generations past where it would have been without the wars.

  • Dan

    A Random Guy:

    Please run your statement by the hundreds of thousands who were employed in the 60s and 70s due to the government's space program. And by all the millions now employed thanks to technological advances such as the Internet and personal computing that emerged from the government's investment back then in space technology.

    Or by any company that relies now on the Interstate highway system to deliver its goods to market. I know my company couldn't get very far without highways to deliver our products. So we'd be out thousands of jobs if they had never been built (heck, we'd probably never have existed).

  • steve

    @Johnson

    I am somewhat familiar with MMT. In fact, there are a number of real (i.e. credentialed) Austrian economists who agree that the MMT accounting tautologies MMTers point to are correct and have written articles on them. Their conclusions are, however, different.

    For example, http://mises.org/daily/5260/The-UpsideDown-World-of-MMT.

    The take away that I liked,

    "As a final way to illustrate the non sequitur of the equations involving government budget deficits, note that we could do the same thing with, say, Google. Go back through all the equations above, and redefine G to mean "total spending by Google." Then C would be "total consumption spending by the-world-except-Google," and so on.

    After doing this, we would be able to prove — with mathematical certainty — that unless Google were willing to go deeper into debt next year, the world-except-Google would be unable to accumulate net financial assets, in the way MMTers define that term. The proper response to this (perfectly valid) observation is, Who cares."

  • Zeeb

    Honestly, if govt in bad times *could* act like a VC, it'd be better than what they do. But alas, if nothing fails, then there's no way to identify the true value-adds.

    I keep saying it -- as long as failure is not recognizable in government ventures, no government venture can work.

  • MJ

    I have never understood the idea that war was good for the economy. You build something (say, an aircraft), then send it into war where it often gets destroyed. This is good?!

    Of course! Just like buying used cars for more than they're worth, destroying their engines, then giving out vouchers that are worth much more than you paid for the car. Stimulus!

  • Gil

    Too true ParatrooperJJ - if there's one sector that's seen ongoing R&D throughout history it's the military.

  • Mark

    Actually there are a lot of jobs that can be done for $20k. Most of them are maintenance type jobs. Consider the janitorial jobs done for city/state/county parks. Warren's company is an example of this.

    If Americans are smart, the public/private partnership is gowing to the trend of the future. Why do we have so many positions being public jobs? When the state of Minnesota "closed down", so did all of its rest area facilities. If you are not asking the question "Why are rest room facility janitors public employees, being paid public employee wages and benefits? then you simply are not very smart.

    We need to move almost every position currently employed by the state to the private sector. Janitors, bus drivers, train conductors, and teachers all should be private employees working for private entities providing goods and services to the city/county/state/nation.

    This would make these services half as expensive and double the productivity.

  • Christer

    Here's a clip with Krugman on CNN, explaining the benefits of an imminent space alien invasion:

    http://www.youtube.com/watch?v=nhMAV9VLvHA&feature=player_embedded

    I really think this clip deserves a wider audience, because this is the way keynesians think.

  • http://thelibertypapers.org/ Brad Warbiany

    I find it strange that Drum thinks $100B will create 5M $20K jobs. I don't think he understands just how much those $20K salaries actually cost the gov't.

    I'll bet when you add all the overhead, those jobs cost the government AT LEAST $30K a year, and I wouldn't be surprised if the number was closer to $40K.

  • ruralcounsel

    "I think wars are a total economic waste and drag on the nation."

    Yeah, right up to the point where they prevent someone from coming in and raping and pillaging their way through your village, or whatever the modern day equivalent of that might be.