THE PRINCETON APPROACH

27 06 2011

Authored by William Robert Barber

Alan S. Blinder is an economist/professor of economics and public affairs at Princeton University; he has some worries. “Right now, I’m worried about the damage that might be done by one particularly wrong-headed idea: the notion that, in stark contrast to Keynes’s teaching, government spending destroys jobs,” he goes on to quote John Boehner’s regular rail against “job-killing government spending.”

Mr. Blinder goes on with an eighth grade level explanation, “The claim is that employment actually declines when federal spending rises. Using the same illogic, employment should soar if we made massive cuts in public spending-as some are advocating right now.” He emphasis his perspective by adding a question: “How, exactly, could more government spending “kill jobs”?

This would be the perfect place to inject the Obama administration’s prediction that spending billions in stimulus will result in holding the unemployment number to 8%. In other words, using Mr. Blinder’s logic, Obama’s Keynesian adaptation to stimulate the economy, employment should soar if billions of taxpayer monies were deployed into the economy. Well, unemployment is at a low of 9.1%; the number could be 15%. Is this NOT evidence that government spending does not significantly abate unemployment?

To Mr. Blinder’s credit he does concede the reality of “dumb public spending,” he continues to declare that such spending deserves rejection. But ends with the conviction that such spending does not kill jobs; I assume he does concede that spending taxpayer monies on dumb stuff does negatively effect the federal deficit. In the interest of fairness he does point out that conservatives view the government as “too big” which, in the conservative mind, leads to a predisposition against spending. The very next one word sentence is “Ok.” He then continues with a question. “How can the government destroy jobs by either hiring people directly or buying things from private companies?” The example given is, “How is it that the public purchase of computers destroys jobs and the private purchase increases jobs?”

Hmm…this guy teaches at Princeton. Well, Mr. Blinder when the government purchases computers they are not concerned about matching the cost against their profits or investment of capital. Instead they need only match the cost against their budget. (Noting that government’s budget, for the most part, only increases year-to-year mostly because the preceding year’s budget sets the dollar standard for the upcoming year’s budget.) Indeed the process of government procurement is diametrically different form the procurement required of private enterprise. If private enterprise over spends there is an obvious penalty. If government over spends they print more money, increase taxes and fees, or borrow from the future. Therefore, when the government purchases computers the only fact of measurable consequence is that taxpayer funds are being spent. As to the proper allocation of those funds, the only real measurement is in the effectiveness of government services rendered. Clearly and unequivocally, private enterprise spends its own capital at its own risk and the sum of that process is that more computers mean more computer users.

The insistence of the Princeton professor is that government spending will not negatively affect unemployment and certainly, drastic expenditure cuts (as proffered by the Republicans) would imperil this shaky economy that, admittedly, still isn’t generating enough jobs. So I assume the point the professor is making: Government cash infusion into the economy is a good thing. While the Republicans are pressing forward the idea that such cash infusion is wasteful and at a minimum will not increase employment and at a maximum will cost the private sector employment.

Greece is enflamed. Rioting in the streets; Greeks beating on Greeks, destroying private and public property; its citizens are overtly breaking the law. The reason for this madness… Citizens young and the old believe that their government betrayed them.

Many years ago, the government of Greece said to its citizens: trust in unions, submit to the socialistic system, trade your individual freedom/liberty in favor of the collective; and the government guarantees your life’s blessings. This trade-off does sound a bit feudalistic. In trade for the protection offered by the Lord the serf submits his life, family, and services rendered to the state. Naturally, the Lord promises to lower his drawbridge when hostiles threaten.

As far as I am concerned issues that are relevant and relative to this nation’s economic system and culture, in the first cause, has more to do with individual liberty, societal freedom, and the measure of such when compared to the degree of government coerciveness. Every citizen must understand that funding government is enabling government. To enable government is to oblige and submit to the power of government intrusion.

We Americans sold our capitalistic soul many years ago; however, we retained the spirit. We traded in our liberty and freedom for the promises inherent in shiny-objects and pretty words, the power of promises and pretence captured our sagacious sense. Now we have a tax system no one understands but everyone must comply. We cannot cure our addiction to consumption. We are presently having a very tough time saving ourselves from ourselves. We have allowed and willingly permitted attorneys and ‘the process’ to do all the thinking for us. Professor Blinder is convinced that a grouping of selected economist could cure our economic ills. He believes, indeed he trusts in the moral integrity of the state to manage the taxpayers’ monies in the interest of the taxpayer; a foolish understanding of government’s operational scope. He thinks that government knows best…and I don’t think that government knows least.

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