Because The Only Thing The Internet Likes Better Than Porn Is Economics.
According to Keynesian economic theory, government spending improves a sagging economy because recessions are caused by drops in private spending. So according to Keynes, the Iraq war should have provided $100B worth of stimulus. No sarcasm involved here; it was under Keynesian economic theory that people started saying that WWII got the US out of the Depression.
Strictly speaking, under Keynesianism, it doesn’t matter what the government spends money on—they could buy $787B worth of Snuggies—it would still stimulate the economy because it increases the amount of money available to consumers in the economy. When Obama said that only the federal government had the resources to get us out of this crisis, he was relying on Keynes’ theory that the government can still accrue debt because no one can stop them from doing so. Neither Keynes nor, presumably, Obama thought that there was a secret federal savings account somewhere.* If there were, you wouldn’t need Keynesian economics to explain what the economy’s problem was or how to fix it. Keynes only enters the picture when there is no money to be spent because consumer confidence has dried up. All that matters is government deficit spending spent on real goods as quickly as possible.
If you examine what Congress actually did with the stimulus bill, you’ll see that that they didn’t actually follow the Keynesian line of thought. If they did, they would be delighted that bank executives were stimulating the economy with expensive lunches and corporate jets. They’d be ecstatic about oil company profits and would be putting their heads together trying to figure out ways to raise gas prices even more. No, I’m serious; remember that in the Derpression, FDR and his team put a lot of work into raising the price of dairy goods, even mandating the slaughter of thousands of dairy cows. And keep in mind that a lot of families couldn’t afford milk already. But this is Keynesianism. If they theory works at all, this is how it works.
Only, that’s not how it’s going to work. Your congressman is perfectly aware that the logical conclusions of Keynesianism are unpopular and have had 80 years of practical and academic criticism to make them less appealing to us than they were to our grandparents. Your representatives in Congress are going to cherry-pick the parts of Keynesianism that will bring him obvious benefit, reject the parts that don’t, and understand none of it. Keynesian economists like Paul Krugman at the NYT are positive on the the stimulus because they happen to believe that virtually any immediate government spending will improve matters. I can guarantee you he doesn’t believe for a second the shiploads of C-SPAN-ready economic bullshit about what will industries will jobs create and what won’t. Keynesianism has its flaws and spurious conclusions, but it can still be treated seriously as a scientific theory. The bullshit spilling out of Congress can’t. On the evolutionary biology model of scientific sanity, Pelosi wouldn’t even register as a smart intelligent design advocate. She’d be ignoring evolution because she an’ Barney saw a dinosaur once in the backyard after kindergarten an’ it was SO COOL.
Regrettably, her stupidity isn’t nearly as cheap as private stupidity.
*Side note: governments are not really able to save money the same way as normal organizations can. With a bank, any money that goes into savings is reinvested immediately in loans or securities so the bank can turn a profit. Not so with the Treasury. Since they issue and back the currency, when they try to save cash, it effectively destroys it by taking it out of circulation altogether. This causes huge deflation when they start saving and huge inflation when they start spending. This is part of the reason why resolving Social Security and Medicare liabilities is so tricky. The trust funds that are supposed to fund them in the future aren’t actual literal dollars saved in a federal mattress so much as a check from the treasury to itself. Better than nothing at all, but it still depends on being able to make good on it. Incidentally, if you look at it from another angle, you can see why a big government surplus is nearly as bad for the the economy as a deficit, and for the same reason.
3 years ago