Counter-Cyclical Thinking

Federal Government spending should, in theory, be counter-cyclical. Thus:

– When the economy is in recession, the government should become the employer “of last resort” and invest in large capital projects that employ a large number of idle hands for a later greater good (Hoover Dam, National Parks, Eisenhower Interstate System, etc.) The business cycle is low so the government payout system is high to put a floor under economic distress.

– When the economy is in growth, and the government is taking in bigger tax receipts and people are employed in (typically better paying) private sector jobs. The government then uses the bigger tax receipts to pay down the debt run up while the economy was in recession and cuts the programs enacted when the government needed to put people to work.

However, we don’t do this. What we have been doing the last three decades is:

– Spending when the economy is low and then complaining that we are spending when the economy is low but demanding the government cough up cash when the economy is low.
– Spending even more when the economy is in growth.
– Complain we are in deep deficit and refuse to spend (while spending) when the economy is in recession again.

As someone who is a student of history and looks favorably on Keynesian economics I am not certain what else to do when the economy goes in to a tailspin other than letting people who end up out of work starve. The government putting up big ticket projects and hiring armies of people puts a floor under the economy. I am not a huge fan of governmental bankruptcy either — see: Greece — but our punditocracy beholden to their twin masters, the 24-hour news cycle and 24/7/365 campaign for reelection, are driven to spend and spend and spend on local projects to ensure people love them while spewing platitudes about “cutting spending” and “cutting government waste.” Thus the spending only gets worse during up-cycles when we have money because, hey, the government has money!

So it’s bad. I don’t have any answers — and I have not heard any suggestions — about what else to do except have the government spend when the economy is bad. The real conversation to have is what to do when the government is awash in tax receipts and that’s a conversation we never seem to have.

Meanwhile, I offer exhibit A: 111 Lawmakers Block Recovery While Taking Credit For Its Success. This is a two-party thing, honestly. The Republicans are simply making spectacles of this worrying trend right now, but it has often been the Democrats in the past. No one even tries any more.

(This was a babble. It has been one of those days.)