What economist Dean Baker said:

We know how to get out of this mess, we have known how for 70 years. We just need the government to generate demand. That means spending money. Ideally it would spend money on useful things like education, health care, and infrastructure, but even if it spent money in wasteful ways it would still create jobs and put people to work.

In the 30s we got much of the way back to full employment with the Works Progress Administration and other programs. Much of what was done was useful — look around, you won’t have to go far to find infrastructure built by depression era programs. However, it took the massive spending associated with World War II to get the economy back to full employment. There is no magic associated with war that makes military spending more effective in creating jobs. The only difference was the that the threat to the nation from the Axis powers removed the political obstacles to the necessary spending.

One of the knee-jerk right-wing rejoinders to demands for a Keynesian response to our current economic crisis, is that it was World War II, not FDR’s New Deal that ultimately pulled us out of the Great Depression. But as Baker points out, that’s not a refutation of Keynes. Massive government spending is massive government spending, regardless of what you spend it on.

All we’re lacking is the political will.

27 replies on “Everybody Knows How to Fix the Economy”

  1. Clearly we just need a good war. Or two!

    Has anyone seen msnbc’s front page? Here’s the verbatim headline “Analysis: Fla. poll surprise shows GOP desperation (aka PLEASE jump in, Gov. Christie)” What the hell?

  2. And the political will is everything, isn’t it? Krugman and the gang warned us that, democracy being the messy thing it is, Obama and Congress might only get that one shot at making a stimulus large enough to count. And even they may be surprised how well the deficit hawks have poisoned everything since, first from the right and now on the left too.

  3. Simply bringing back the bazillion jobs that corporate America has shipped overseas would go a long way towards restoring employment in this country – and it wouldn’t cost the government a cent.

    Of course, it’s never going to happen, so dream on.

  5. The reason the right wing will spend on war but not on peace is simple. It kills them that anybody benefits from government spending if it’s not the military industrial complex getting the largesse.

  6. @4: That’s just robbing Peter to pay Paul.

    Those overseas jobs create just as much demand for American products as do local jobs. They also keep prices of consumer goods down, which makes them accessible to lower income consumers and stabilizes the jobs that do remain here. Drawing arbitrary lines around countries only adds inefficiencies to the market, and that’s not how you pump life back into an economy.

    We should instead focus on eliminating market inefficiencies, such as America’s very bad habit of paying CEOs far more than they are worth.

  7. “Those overseas jobs create just as much demand for American products as do local jobs.” Absolutely 100% WRONG. The whole reason business are moving jobs overseas is so they can pay the workers less. Less pay is less purchasing power, is less demand.

    Those arbitrary lines around countries matter as long as the laws and institutions in those countries are different. NAFTA is part of the reason we’re in this mess.

  8. @7 Trade protectionism was one of the responses in the 1930’s, leading to a rise in nationalism and xenophobia, and, eventually, war. It may pump life into an economy, but it pumps death into a society.

  9. Defense spending itself is much less effective than it used to be at boosting the economy because much of the budget is for multibillion dollar contracts, more of which go to the profits of a small number of giant international defense conglomerates and top-level executives. This is true both for highly complex weapons systems which use relatively little human labor to build because most of the complexity is in design and electronics, and for logistical support of overseas operations (which spend unbelievable amounts providing things like motor fuels, food, and air conditioning to remote, undeveloped, and dangerous locations).

  10. @6 Hate to break it to you, there is no “military industrial complex”, or at least it’s not that complex. There is no great conspiracy, there is no one driving the machine, and there hasn’t been for a long time. It’s just a bunch of cogs spinning in place separate of each other.

    @7 Well, CEOs earn about $65,123 – $443,400 after adding in all the bonuses and non-taxable income. I do agree that most are way over paid because they don’t do so much, but some do earn every penny of what they earn. The thing is, many get tax breaks by donating large sums to charities, so it’s a double edged sword, cutting all their pay that is. The real problem is from all the people below them, most not even really working or doing much of anything, the office staff that spend more time gossiping at the coffee machines than doing actual work. The true freeloaders of capitalism.

  12. @7

    But what it amounts to is taking American capital and giving it to foreign economies.

    The money being made by American companies with manufacturing in foreign countries isn’t being made by the common man, at least not the American common man; it’s being made by American wealthy elites who run and own stock in those companies.

    It may drive down the cost of consumer products, but it also drives down the wages of American workers; so the lowered cost of those goods is negligible.

    But, what other market inefficiencies would you suggest we rid ourselves of, aside from the one, mostly irrelevant example of CEO pay; most of those types make most of their money from investments rather than payroll, you know. But perhaps your market inefficiencies are related to the outsourcing of labor; when the only ones making any decent living wage are the already independently wealthy, and there’s no manufacturing base to provide decent jobs to the working man, of course you’re going to see a gigantic disparity in wages.

  16. Washington isn’t lacking the political will.

    The republicans control the house, which controls spending, and they’ve already told everyone they want the economy and the country to continue to burn in order to help their future election chances.

    They’re all wealthy, they don’t give a shit what happens to the middle class and the poor of this country.

  19. @12: Not all CEOs are overpaid, but take Lee Raymond, former CEO of Exxon, who was given almost a half a billion dollar retirement package. What exactly did Exxon shareholders get for that huge expenditure? Quite literally nothing. While Raymond’s payout may not meet the legal definition of theft, it basically had the same effect, financially speaking.

    Where is Raymond’s money now? Sitting idle in a bunch of investment accounts. Alternative, it could have funded almost 1000 6-figure jobs for 4 years. Or provided venture capitol for several dozen tech start ups.

    And sure, you’ll certainly find waste among any company’s rank and file, but the cost to the company is going to be orders of magnitude smaller than an overpriced CEO.

  20. @22 Granted, my office staff complaint is that they get paid more than hard workers still and do less than most CEOs, but I generally hate them anyway because they are usually the lazy assholes that think their time is more important than everyone else’s. My point however, you understood quite well, some CEOs do actual work and earn their living. Bill Gates is one off the top of my head, though I honestly can’t think of anymore than him, and he’s actually an ex-CEO now. I’m sure there are other great examples.

    But here’s something people are missing, the reason this economy fix of balancing out the tax percentages and getting rid of the frivolous cuts is taking so long isn’t because of CEOs, it’s because people like Obama, the high and mighty politicians, are making even more money off these cuts. That was the whole reason Bush pushed them through so easily in the first place. The politicians do NOT want to hurt their pocket books, so they drag their feet when facing the possibility of having to pay their fair share.

  21. @23: I don’t have a problem with entrepreneurs like Gates or Jobs getting rich from the valuation of the companies they founded. Our society has a shared interest in entrepreneurship, and it makes sense that there be incentives for taking on the huge risk of starting a business, given that most of them fail.

  22. The money being made by American companies with manufacturing in foreign countries isn’t being made by the common man, at least not the American common man; it’s being made by American wealthy elites who run and own stock in those companies.

    And the money goes to the elites in those foreign countries, the people who largely own and operate the factories where products are now made. Those people invest more in their home economies than any American ever would. That’s what brings third world countries out of the dark ages and what stimulates demand for American products.

    But keep convincing yourself that it makes sense to pay an American $20/hour to sew cotton t-shirts.

  24. There was a story on ABC News Friday night that states like Minnesota and California are using gov’t money to fix infrastructure and Chinese companies with workers from China are getting the jobs because the businesses are subsidized by the Chinese gov’t and so they underbid US companies. The states have to go with the low bidder. So even on fixing stuff—like the goal with WPA, is getting undermined by foreign competition.

    As for military spending, today there was a story in HuffPo about the US military giving away everything they spent money on in Iraq to Iraq—but it’s going straight to black markets there. Giant bases with amenities for folks stationed there along with the military equipment too. Billions and billions of dollars worth of stuff. The base was constructed shortly after the Iraqi invasion because the Bushies thought it would be a staging area for troops long term. Funny how that wasn’t really covered. The money waste on that, but people like Eric Cantor want to nickle and dime disaster recovery while pretending crap like Iraq didn’t happen.

  25. @21:

    Pro-Tip: Reading is fundamental. Doubly so for footnotes*:

    Total Pay combines base annual salary or hourly wage, bonuses, profit sharing, tips, commissions, overtime pay and other forms of cash earnings, as applicable for this job. It does not include equity (stock) compensation, cash value of retirement benefits, or the value of other non-cash benefits (e.g. healthcare).

    Which is why you’re numbers are so ridiculously, laughably off, my youngest KittyKat.

    *Hint: Click on the “(?)” next to “Total Pay” here to view the footnote and take into account its implications. (Before you go around quoting these ill-considered “facts” in the future, friend.)

  26. This all reminds me of one of my favorite (infuriating) little pieces of new GOP Orwellian/Frank Lutzian doublespeak: when they divide the cost of a program by the number of employees to come up with insanely overinflated “cost per job” numbers.

    Listen folks, if it cost $100 million to build a bridge, and building the bridge employs 200 laborers, that does not mean those jobs “cost you half a million for each job”.

    The bridge cost you the money — and you’ll still have that around to use long after this economic mess is just a fading memory.

    The jobs you get for on top of that? Those get thrown in for free!

  27. This post confuses me. If “Massive government spending is massive government spending, regardless of what you spend it on,” is going to get us out of the recession, why isn’t the current amount of massive government spending helping?

    If it doesn’t matter what we spend it on, then why not continue to maintain the world’s largest military, or even grow it? I mean, WW2 didn’t increase the amount we spent on teachers Ior infrastructure, did it?

    I’m not saying that we shouldn’t spend as a solution to the recession, because I honestly don’t know. This isn’t like global warming or evolution in which there is no serious disagreement between honest, accomplished people. There are very honest, accomplished people on both sides of this debate. I think the only people who really don’t know what they’re talking about are the ideologues. The ones who think the solution to the problem is simple.

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