We go on the road to Ohio today, not because it is necessary to go to the Midwest to find economic reporting in need of correction, but rather because we have such a beautiful example. The Columbus Dispatch tells readers, "the $300 billion targeted for social programs, many of them Democratic favorites, would not generate much immediate economic activity. Improving teacher quality, providing additional cash for Head Start and promoting wellness, for example, are standard government social-spending items that have little to do with stimulating instantaneous economic activity." In fact, this spending, unlike the highway spending of which the paper approves, will provide an immediate boost to the economy. Paying someone to teach kids or provide health care creates jobs as surely as paying them to pave a highway. The former is better stimulus because we can typically get a teacher on the job more quickly than we can get work for a new highway contracted out and underway. The Dispatch goes to tell readers that: "More fundamentally, government spending is a zero-sum game. The only way the government can spend a dollar to stimulate the private sector is by taking a dollar out of the private sector. That can be a good idea only if one believes that politicians and bureaucrats know better how to invest that money than do consumers, businesses and entrepreneurs." This is exactly wrong. The whole point is that the economy has a vast amount of idle labor and capital right now. If the government doesn't spend the money no one will spend it. We will simply have higher unemployment. This is the thinking that Keynes and Roosevelt had to combat to get the economy out of the Great Depression. I had been telling people that we need not fear a depression, but if views like those expressed by the Columbus Dispatch are common, then we might. The economy is in a free fall right now. If the government is not prepared to spend lots of money (ideally on useful projects) then we can see a very deep and long downturn.
--Dean Baker
