In today’s news I see congress raised the limit on the nation debt by 1.8 trillion dollars. And the house passed a 1.1 trllion spending package. We are told the spending will create jobs and make the country prosperous.
But if this was true, wouldn’t we already be prosperous? The government has spent like a madman for as long as I can remember. Why are we in a recession today?
The theory behind Keynesian stimulus spending is that it is used to create government-funded jobs. The government-funded workers will spend their money for goods and services in their communities, which in turn causes job creation producing and selling the goods and services they buy.
This sounds good on paper, but it doesn’t seem to work today. Why? I’m no economist, but it seems to me that most of the government spending going on today doesn’t go to job creation. How, for example, does bailing out Wall Street create jobs? How does buying GM create jobs? How does funding an airport that no one uses create jobs? How does subsidizing “green technology” so it can produce prohibitively expensive and usually ineffectual products that no one wants create jobs?
I’m sure a few jobs were created or saved by all the spending. There are bankers and brokers who are sleeping better now. There are researchers and scientists living off government grants who would be working at McDonald’s otherwise. And there is a handful of employees working at the Murtha airport waiting for the single daily flight to land. But this seems like a big price for such a little return.
Maybe we need another round of spending, assuming the Treasury can find buyers for the debt.