It’s depressing that Obama, or anyone else really, hasn’t challenged the Republican orthodoxy that it’s always best to cut taxes and spending, regardless of circumstance. We can have intelligent arguments about specific macroeconomic models, and come up with different conclusions about what to do, but if your answer is always the same, you’re not taking this stuff seriously.
“Cut spending to create jobs” is a phrase that drives me nuts. If you listen to the news, it seems like the government spends money by throwing it into a fire. The truth is that when anybody, including the government, spends a dollar, that dollar becomes income for somebody else. Government spending represents the income of government employees or private contractors. A cut in spending will lead to layoffs, directly or indirectly.
When unemployment is low, those laid off workers can find other jobs. And this reduces competition between government and private business for workers. So a cut in spending is a good move sometimes.
But right now unemployment is high. The private sector doesn’t have jobs for all the people already looking for work. So a cut in spending will simply add more unemployed people to the pool.
On the bright side, for all their talk, Republicans have never actually reduced spending in a significant way. But they certainly won’t try to increase it in any useful way.
Somebody needs to frame spending as investment. The basic rule of investment: buy low, sell high. Right now, everything is low. Interest rates are low, meaning it is cheap to borrow money. Employment is low, meaning it is cheap to hire people. This is the perfect time for projects that will do economic good in the long term, like a new tunnel under the Hudson River. If the government pays for it now, it will reap the benefit in taxes collected from the people and businesses that will benefit from the tunnel.
Unfortunately, New Jersey has an orthodox Republican governor.