Oh, this is spe-shullll.
Jeffrey Miron, economics putz from Harvard, tells us that what the economy really, really needs is yet more tax cuts:
The goal will be to end or moderate the recession. According to the textbooks, government spending raises the demand for goods and services. Tax cuts also spur demand by putting more income in the hands of consumers or more after-tax profits in the hands of businesses.
Is a fiscal stimulus good policy? The answer is no if the stimulus consists of increased spending. The stimulus may be good policy, though, if it consists of lower taxes.
And what's Mr. Harvard's miracle cure-in-a-bottle that'll fix all our economic ills? Why,
less government regulation, of course!
No doubt some roads need repairs, but the U.S. already spends huge amounts on its highway system. The U.S. could address existing deficiencies by increasing the use of toll roads and charging drivers extra at rush hour, or by repealing prevailing wage laws that inflate construction costs.
Alternative energy? Less gummint regulation!
Research on alternative energy is fine, but government funding is likely to come with costly strings and political interference.
A better policy is higher taxes on gasoline and other fossil fuels, which would enhance the private sector's incentive to undertake such research.
Education problems? Get the feds outta our schools!
Additional spending on education makes sense in some cases, but the level of spending is already substantial. Improvements in education are more likely to come from expanded school choice and elimination of policies that limit efficiency, such as rigid hiring and firing rules negotiated by unions.
In fact, it's better if the government spends NO MONEY AT ALL since it's all just probably going to pork, anyway:
Even if certain components of the nation's spending are too low, nothing guarantees that new spending will be directed to these areas. Instead, experience suggests that much will be for repairing "bridges to nowhere," especially those located in the districts of influential legislators.
I know what you're saying - "Mr. Crazy Harvard Economy Guy, what about public works projects, huh? Like
the CCC that did all that work on public parks during the Thirties?"
According to Mr. Economics, it's all just piffle:
The Keynesian argument for a spending stimulus does not, of course, assume this spending is for projects that have economic or social value. The theory, in fact, suggests that digging ditches and then filling them up is effective at stimulating the economy.
This cannot make sense in the long run; government spending must be paid for with taxes, so it ultimately comes at the expense of private spending. Projects that do not make economic sense are then pure waste.
Right, you
can't make a profit on increasing people's appreciation of nature, so screw it!
In fact, that leads to the bestest part of the article:
Yet the history of government spending indicates the stimulus package will include countless zoos, aquariums, museums, parks and other pork barrel projects for which the private demand does not come close to justifying the investment. In many cases, these projects will persist for decades.
Yep, if it's a zoo, aquarium, museum, or park, to Mr. Educated University Guy it's just useless waste of money! I mean, public parks? Where people are allowed to come in and wander around without even PAYING anything? WTF is up with that? And museums full of crappy old useless junk that isn't being used to generate profits? Why not make some money at it and sell all that crap to private collectors? Who cares if the public can't access it? What the hell are they doing spending their time in museums and zoos, anyway, when they could be at Wal-Mart supporting the economy?
Let's instead give more tax cuts so people can buy books instead of going to libraries, can buy art instead of going to galleries, and buy landscaping so they don't need "public" parks in the first place:
Consider instead using tax cuts to simulate the economy. Most tax cuts enhance economic efficiency by giving the private sector better incentives. Reductions in the corporate income tax, for example, increase the incentives for investment, while reductions in personal income taxes raise the incentives for work and saving.
Tax cuts also stimulate demand via the standard Keynesian channels of increased disposable income for consumers and higher cash flow for businesses. Tax cuts thus improve economic performance in the long run and the short run.
Of course, towards the end of the article he seems to shoot his own arguement in the foot, suggesting that higher taxes are inevitable regardless of what's done now:
Is the U.S government too large? This is not the place to address that question, but it is the crucial issue that policymakers and society must confront. If the level of spending is about right, then the U.S. must raise taxes sooner or later. A tax cut now therefore means an even larger increase down the line.
Summing up?
The overall point is that government spending should be determined by long-run costs and benefits, while taxes should be sufficient to pay for programs that make sense on these grounds. Concern with stabilizing the economy in the short run is understandable, but it often generates policies that are counterproductive over the long haul.
I.e. we should decide public policy based on "long-run costs and benefits", but in an almost vulgar Marxist parody of capitalist economics, we should make those judgements based entirely on monetary considerations and not on some airy liberal artsy-fartsy "public good". More factories, fewer museums; more shopping malls, fewer parks; more Wal-Marts, fewer libraries.
There's nothing to indicate Mr. Miron is an adherent of Ayn Rand, but it sure as hell sounds like it.
