The Senate (with the help of a few Republicans, including Scott Brown) is passing the new Obama “jobs bill,” which will spend another $100+ billion supposedly to create new jobs. On the surface, the jobs bill idea seems logical: we have high unemployment; why not have the government spend $100 billion to create new projects that would give employment to more Americans?
And yet all previous jobs bills of this kind have failed. The $150+ billion stimulus package President Bush launched in 2008 led to more, not less, unemployment. The $787 billion stimulus bill that President Obama supported in 2009 raised such high hopes–but unemployment that year soared from 8 to 10%. A roughly similar result occurred when FDR threw his many New Deal programs at unemployment in the 1930s, and after almost seven years, the U. S. unemployment rate was a colossal 20.7%–higher than at any time in U. S. history except for the Great Depression years of Hoover and FDR.
These “jobs bills” fail because all “government spending” must come from taxpayers, or from borrowing (which means repayment with interest by future generations). We are simply turning our tax dollars over to politicians to spend the way they want. And when they spend it, they invariably use it to send pork projects into their districts to help them secure re-election. And those pork projects are often economically unsound. The conclusion here is this: no nation’s government has ever spent itself into prosperity. And no nation ever will. The proven way to increase prosperity is to cut tax rates and give citizens more freedom to earn and spend money the way they want. When President Reagan did that in the 1980s, he helped launch a 25 year run of U. S. prosperity (President Clinton also kept the prosperity going with capital gains cuts and serious welfare reform). Will we learn from the past, and turn to freedom instead of government taxation? History is a marvelous teacher.
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Dr. Folsom, enjoying looking over your site so far.
But I have one question:
As an historian, what is your take on the liberal/Keynesian argument that out of the last 18 recessions/depressions in US history, they were never gotten out of by reduced government spending, but rather INCREASED spending, and those attempts made at shoring up the budget resulted in WORSENING the crisis, etc.
The argument from some sites is that the government has never gone broke by enlarging deficits and no one in the next generation REALLY has to pay the freight on all this spending. And that it does not work that way in the long run:
http://www.facingup.org/blog/%5Buser%5D/2009/12/quotbogus-arguments-about-burden-debtquot... See More
http://www.nakedcapitalism.com/2010/02/wray-the-federal-budget-is-not-like-a-household-budget-%E2%80%93-here%E2%80%99s-why.html
IN other words, fretting about this is merely hysteria?
Or, there is nothing really to worry about in deficit spending so long as it goes for the projects that boost economic performance.
Mr. Tolbert,
I’m glad you are enjoying the blog. I appreciate your thoughts about the Keynesians, and their arguments that we can spend ourselves into prosperity with federal tax dollars. If only that could work, no nation would ever have to suffer economically–it could just go into deep debt and live it up generation after generation. One of your sources observed the debt reduction in the 1920s, and said in effect, “Hey, we ran surpluses in the 1920s and then the Great Depression hit in 1929.” Therefore, by implication, we should have been going into debt, not paying it off because somehow the budget surpluses caused the depression. What actually happened was that in 1929, we changed from a more market-based economy, which had delivered prosperity, to a more government controlled economy, with Federal Reserve rate hikes, the highest tariff in U. S. history, and later a large tax increase. That government intervention, not the freedom we had during the 1920s, caused the crash and the worst economic crisis in U. S. history. But thanks for your post. It is good to think through the arguments of the Keynesians.