Politics & Policy

Manmade Disasters

Hurricanes, alien invasions, and other stimulus programs.

Earthquakes, hurricanes, floods — Paul Krugman should be ecstatic. Not about the suffering and loss of life, obviously, but because the cleanup and rebuilding should provide exactly the sort of Keynesian stimulus that Krugman believes this economy needs. There is now an increased demand for home construction, flood remediation, and auto repair.

Remember, this is the same Paul Krugman who mused, a few weeks ago, that what this country really needs is an invasion by space aliens. Preparations for an intergalactic war would mean that “this slump would be over in 18 months,” he suggested.

#ad#That is because Krugman and other Keynesians believe that what is troubling this economy is a lack of demand. Anything, therefore, that causes people — or governments — to buy more things is good, be it a disaster, space invasion, or a government jobs program. Keynes himself famously noted that the government could create employment during a recession simply by paying some people to dig holes and other people to fill them in. It’s only logical, therefore, that we should welcome at least the economic effects of destruction, so we can create jobs by rebuilding.

It follows, then, according to Krugman, that “we should have a lot of job-creating spending on the part of the federal government, largely in the form of much-needed spending to repair and upgrade the nation’s infrastructure. Oh, and we need more aid to state and local governments, so that they can stop laying off schoolteachers.” Krugman also wants a further extension of unemployment benefits and other increases in social-welfare spending to put money in people’s pockets and increase demand. Those individuals who receive government payments are able to purchase goods and services that they would not otherwise be able to. The sellers of those goods and services receive income that they would not otherwise receive, and are therefore, in turn, able to purchase additional goods and services. This cycle multiplies through the economy, generating growth. Krugman, for example, estimates that “a dollar of public spending raises GDP by around $1.50.”

And tomorrow night we can expect President Obama to give a full-throated endorsement of Krugmanomics.

The details of the president’s job program are being kept under wraps, but the broad details are pretty well known. The president wants more federal infrastructure spending, including an “infrastructure bank.” He wants to give states and localities more money to repair and rebuild schools, on the condition that those localities stop laying off employees. He wants to extend unemployment benefits again. And as a sop to those who want tax cuts, he will call for an extension of the payroll-tax cut passed last December, exactly the sort of Keynesian tax cut designed not to spur investment but to put more spending money in people’s pockets.

But natural disasters do not create economic growth. Hurricanes, earthquakes, and space invasions destroy wealth. The money that people have to spend rebuilding their houses, drying their basements, or buying new cars is money that they can no longer use to go on vacation, send their kid to college, or spend on something else that they want or need. The money that insurance companies must pay out to compensate victims is money that is not otherwise invested in the economy. 

And for the same reasons, more government spending will not create more jobs. Government has no money of its own. Therefore, any money that it uses to finance its programs and operations must, of necessity, be extracted from others, either through taxes or borrowing. That means less money for people to spend the way they wish, and — particularly worrisome at a time of slow economic growth and high unemployment — less money available for the private sector to invest, expand, and hire workers.

Worse, this is not just a question of substituting a dollar of government spending for a dollar of private spending, although obviously every dollar that government spends ultimately means one less dollar of private spending. But private spending and investment decisions are allocated on the basis of economic forces. People seek the best return on their investments or the best deal on their purchases. Governments allocate much if not most of their spending on the basis of politics. The result is that government spending introduces a host of inefficiencies into the economy, as people and businesses spend time, money, and effort either trying to gain government favors or minimize their share of government costs.

For the last two years the Obama administration and its critics have been arguing about whether the last six stimulus packages created or saved jobs. Undoubtedly, they have, and some conservatives sound silly arguing otherwise. And hurricanes and earthquakes will create some jobs, too. But that is not the real question. What matters is whether on balance we are better or worse off as a result of such events.

And when it comes to government jobs or stimulus programs, what matters is whether those programs created any net jobs after all the negative effects of the spending and debt are taken into account. The question is not “Did we create jobs?” but rather “Might we have created more jobs if we hadn’t diverted all those resources to the government in the first place?”

There’s not much we can do to avoid natural disasters. Hurricanes and earthquakes will always be with us. But manmade disasters we can do something about. With that in mind, we should rejection another round of more-of-the-same from the Obama administration.

 

— Michael Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.

Michael Tanner — Michael Tanner is a senior fellow at the Cato Institute and the author of Going for Broke: Deficits, Debt, and the Entitlement Crisis. You can follow him on his blog, TannerOnPolicy.com.

Most Popular

Politics & Policy

Students’ Anti-Gun Views

Are children innocents or are they leaders? Are teenagers fully autonomous decision-makers, or are they lumps of mental clay, still being molded by unfolding brain development? The Left seems to have a particularly hard time deciding these days. Take, for example, the high-school students from Parkland, ... Read More
PC Culture

Kill Chic

We live in a society in which gratuitous violence is the trademark of video games, movies, and popular music. Kill this, shoot that in repugnant detail becomes a race to the visual and spoken bottom. We have gone from Sam Peckinpah’s realistic portrayal of violent death to a gory ritual of metal ripping ... Read More
Elections

Romney Is a Misfit for America

Mitt’s back. The former governor of Massachusetts and occasional native son of Michigan has a new persona: Mr. Utah. He’s going to bring Utah conservatism to the whole Republican party and to the country at large. Wholesome, efficient, industrious, faithful. “Utah has a lot to teach the politicians in ... Read More
Law & the Courts

What the Second Amendment Means Today

The horrifying school massacre in Parkland, Fla., has prompted another national debate about guns. Unfortunately, it seems that these conversations are never terribly constructive — they are too often dominated by screeching extremists on both sides of the aisle and armchair pundits who offer sweeping opinions ... Read More
U.S.

Fire the FBI Chief

American government is supposed to look and sound like George Washington. What it actually looks and sounds like is Henry Hill from Goodfellas: bad suit, hand out, intoning the eternal mantra: “F*** you, pay me.” American government mostly works by interposition, standing between us, the free people at ... Read More
Film & TV

Black Panther’s Circle of Hype

The Marvel Cinematic Universe (MCU) first infantilizes its audience, then banalizes it, and, finally, controls it through marketing. This commercial strategy, geared toward adolescents of all ages, resembles the Democratic party’s political manipulation of black Americans, targeting that audience through its ... Read More