It’s one thing for Washington’s current leaders to reanimate the pocky corpse of long-dead Keynesianism during the gale of political opportunism and poll chasing amid this recession. It’s even worse when they show that even they know it’s all a bunch of hooey.
Remember what the titular character in Stanley Kubrick’s Dr. Strangelove said about the Doomsday Machine, the Soviet Union’s automatic retaliatory nuclear-strike deterrent? “The whole point of the Doomsday Machine is lost … if you keep it a secret!”
Well, in this case, the whole point of opportunistic Keynesianism for show is lost if you don’t keep it a secret. But President Obama has stumbled all over that key element.
Obama and congressional Democrats, faced with a sour economy but also a fretful public willing to accept fantastic measures to address the downturn, capitalized on the golden opportunity: People are giving us free rein to spend as much as we want, and all we have to do is call it “economic stimulus”! Joy!
Not that this is an exclusively Democrat affair, mind you. Recall that President Bush had his own Keynesian extravaganzas (less lavish, of course; when Obama promised “change,” he apparently meant change in the order of spending magnitude), and Sen. McCain, Obama’s 2008 election opponent, infamously put his campaign on hold to pass the first bailout bill. We’ve seen how well those efforts have worked.
Nevertheless, the basis for the spendstravaganza is the supposed need for government money to stimulate the economy. That is the core of Keynesian policymaking, that government money (either through taxation, debt, or artificial money creation) will stimulate spending, which will stimulate industry, put folks back to work, and force the economy into recovery. The opportunity costs of the government getting that money must be studiously ignored — they are defined away in theory, anyway; the Keynesian assumes government spending has a “multiplier effect” that is always greater than one. That is to say, government spending is assumed to create wealth. So the wealth-maximizing position calls for more government spending — more, more, a trillion times more!
Which works so long as the politicians keep up the charade. Obama, struggling in vain to square the enormity of spending under his brief watch with his stated preference for fiscal responsibility, just cannot. He inevitably makes Oz-behind-the-curtain blunders.
Take, for instance, his warning mayors “not to waste stimulus money.” How, pray tell, could stimulus money be wasted? It can’t, according to the theory, which assumes that even the government paying someone just to dig and fill holes would have a net positive economic effect.
The only theoretical way to waste government stimulus money would be not to spend it, because then it wouldn’t be subjected to that magical multiplier effect.
The president has also recently declared that his administration seeks to reduce the budget deficit by half — a curiously guilt-ridden admission in an age where deficit spending is supposedly more important now than ever. He has since decried earmarks and pork-barrel spending despite signing bills full of them — also curiously guilty-sounding comments coming from someone adamant that Keynesian government is the only path to lead the nation out of economic woes. He has now adopted the phrase “new era of responsibility” in an attempt to define the binge’s aftermath.
It can be said that at least the president, unlike the congressional leadership, appears to have a fiscal conscience. Were he a true believer in this Keynesian spending spree, he would not be making so much noise about wasting the money, seeing it spent on thousands of congressional pet projects, or watching the deficit balloon like Bullwinkle just before Macy’s Thanksgiving Day Parade.
But were he not such a politician, he wouldn’t be making so much noise after the fact. Obama wants the people who want government to rescue them and think government can to believe he’s going to save them, but he also wants the people who were appalled by Bush’s budget deficits and who are mouth agape at the spending bills so far this year to believe he’s one of them.
It doesn’t seem a tenable position in the long run. In the meantime, the fact that guilt (or political necessity) is compelling the president to admit, however obliquely, that this year’s spending antics are irresponsible, budget busting, deficit spiraling, pork-barrel rutting without parallel should return the theory behind it all back to its grave.
Jon Sanders is a policy analyst and research editor for the John Locke Foundation.