Republicans are gonna love this. Robert Reich, former Harvard professor (currently at the University of California, Berkeley’s Goldman School of Public Policy) and Clinton-era Secretary of Labor, wants to resurrect Keynesian economics. The whole post is worthy of your time, but this paragraph in particular caught my attention:
What the hawks don’t get is what John Maynard Keynes understood: when the economy has as much underutilized capacity as we have now, and are likely to have more of in 2009 and 2010 (in all likelihood, over 8 percent of our workforce unemployed, 13 percent underemployed, millions of houses empty, factories idled, and office space unused), government spending that pushes the economy to fuller capacity will of itself shrink future deficits.
Remind me, again, why is the economy currently underutilized? I bet Republicans will say it is because the market isn’t allowed to run wild and crazy and free. Or they’ll just ask for more tax cuts for the uber-wealthy, in a perpetuation of the only-the-mighty-know-best theory. I know they’ll be lining up at Walmart at 4am, I just know it.
So, if the private sector won’t invest enough, maybe the general public will? Some how I don’t think so. Our paychecks seem to be getting smaller, our credit cards are maxed out, and we’re all dead scared of losing our jobs and our benefits. And no small ‘stimulus’ check for $600 is going to change that. Besides, what was your experience like last time, did it just get swallowed up by the credit card monsters, eh?
Nope, it’ll have to be the spender of last resort, Big G, government. Spending money on fixing roads and bridges before they fall down, repairing levees and ports before they reach breaking point; investing in mass transit, improving our water supply, investing in new sources of energy and new ways of conserving energy. Sounds like stuff we could all use.
Reich’s love affair with Keynes isn’t new. In fact, Reich’s piece for Time Magazine’s 100 Most Important People of the Century is a nice primer on Keynesian economics. Here’s where Reich repeats the nub of it:
Keynes’ basic idea was simple. In order to keep people fully employed, governments have to run deficits when the economy is slowing. That’s because the private sector won’t invest enough. As their markets become saturated, businesses reduce their investments, setting in motion a dangerous cycle: less investment, fewer jobs, less consumption and even less reason for business to invest. The economy may reach perfect balance, but at a cost of high unemployment and social misery. Better for governments to avoid the pain in the first place by taking up the slack.
I might just be a Keynesian. Just don’t tell the Republicans.