Trump Priming

by Ramesh Ponnuru

Robert Draper reports that Donald Trump wants to “prime the pump”:

Trump seemed much less animated by the subject of budget cuts than the subject of spending increases. “We’re also going to prime the pump,” he said. “You know what I mean by ‘prime the pump’? In order to get this” — the economy — “going, and going big league, and having the jobs coming in and the taxes that will be cut very substantially and the regulations that’ll be going, we’re going to have to prime the pump to some extent. In other words: Spend money to make a lot more money in the future. And that’ll happen.” A clearer elucidation of Keynesian liberalism could not have been delivered by Obama.

A few points about this:

First: If Trump is serious about this, then, perhaps needless to say, deficit reduction is off the table. If he offsets higher infrastructure spending with spending cuts elsewhere, or makes sure his tax reform is revenue-neutral, he’ll defeat his pump-priming purpose.

Second: The pump-priming rationale isn’t just an argument for more deficit spending; it’s an argument for relatively indiscriminate deficit spending. To the extent that the goal of an infrastructure-building program is to make America more productive, then policymakers should seek bang for the buck. They should try to spend as little as possible to get the most and highest-quality infrastructure. To the extent the goal of the program is to get money into people’s pockets, they should think exactly the opposite way. Pay people to dig with spoons, not shovels.

Third: Even assuming the soundness of Keynesian views about fiscal stimulus, now is not the time that they would recommend higher deficits. The case for higher deficits as a way to expand the economy as a whole is much, much weaker than it was at the trough of the great recession in 2009. If Trump’s spending increased total spending throughout the economy, that extra spending would be more likely to take the form of inflation than of increased economic activity than it would have been then.

Fourth: But a burst of federal spending probably wouldn’t increase total spending anyway, but instead just cause the Federal Reserve to tighten monetary policy more and faster than it otherwise would have. In that case we’d have more government spending and less private-sector spending within a roughly unchanged total.

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