I intended to begin today’s column something like this, but Cicero beat me to it — by 2,064 years: “The budget should be balanced, the treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt.”
What Cicero was referencing is the imprudence of spending beyond one’s means. Spending by the prior administration and Congress was bad enough, but it will soon reach astronomical levels, causing significant inflation.
Countries included toward high government spending have usually used the famous English economist John Maynard Keynes as justification. Some 75 years ago Keynes examined historical economic statistics in England during relatively stable times. Unfortunately, historical statistics for England then are not relevant for America now. We are a different people; this is a different time.
Most of the jobs created will not be self-sustaining because they will require more government spending. Furthermore, much of the hoped-for private spending will not occur because many consumers will either save or reduce their debt. Businesses, rather than hire additional employees, will probably either reduce their inventories or else use the temporarily higher demand simply and simply retain existing employees.
The stimulus spending is aimed at “creating or saving four million jobs.” But how will anyone every know how many jobs have actually been saved?
President Roosevelt tried the same Keynesian, pump-priming approach. Eight years into the New Deal, however, Treasury Secretary Mogranthau admitted, “We are spending more than we ever have spent, and it does not work.” Why can we never learn?
David R. Dilley is a retired economist living in Pelican Landing. Dilley received his master’s and doctoral degrees from Indiana University. He has taught at Indiana, Pittsburgh and NYU’s Graduate School and retired from U.S. Steel in 1985 as chief economist. Reach Dilley at firstname.lastname@example.org.