There’s an interesting conversation taking place in Washington DC. They (the White House and the Democrats in Congress, mostly) are saying that the Sequester is going to hurt the economy.
It’s interesting to me how they link government spending and the overall economy. The thrust of their anti-Sequester argument is that reducing government spending hurts the economy.
It was the anniversary of the Rick Santelli’s speech that is credited with starting the Tea Party a few days ago and I heard a snippet of what he said, and he made a good point (paraphrasing): If the multiplier on government spending is greater than one, why doesn’t the government spend infinitely and drive us to incredible prosperity?
Has the stimulus (four years of it now, by the freeking way! It’s the baseline now) stimulated anything? Not so’s you’d notice. Why not? Clearly government spending drives the economy. Are you saying maybe it’s something else?
How would you practically guarantee anemic growth? Here’s what I would do: First, I’d hamstring the private sector with regulations, taxes, and general uncertainty. Make entrepreneurial activity harder, and make investment more risky. Keep everybody off balance all the time. Then, I’d expand the welfare state, so that there are hoards of people who only get paid with money taken from someone else, passed through bureaucrats’ hands, and given to them without them having to produce so much as a bowel movement (though with food stamps in high supply, we’re going to get those, but the money won’t even be tied to something that productive). I’d look at growth of government as the driver of the economy (given the private sector isn’t getting the job done). I’d increase the welfare state, and I’d also increase the bureaucracy, hiring thousands of people to administer the leviathan state and I’d pay them really well, despite the fact that their wages are a net wealth sump. Once you get enough of them, shrinking the government and throwing a bunch of people out of work–despite the fact that they are engaged in unproductive, non-wealth producing activit–becomes unthinkable. You can show real pain if anyone dares to mention that government is too big. My God, man… Janitors in the halls of Congress may be furloughed. Those are real people with families!
If one successfully pulled this off, what you’d have is prosperity that seemed inextricably tied to the spending in Washington DC. Cut the budget, you cut the GDP, and hence prosperity. The trade-off is that you could only grow GDP by approximately the same amount as you’re expanding government.
It’s guaranteed economic anemia, but with a built in bias for more government spending. You accomplish it by first neutering the private sector. Mission darned near accomplished.