It is hard to know whether the almost inevitable new New Deal, which I will call The American Rapture for lack of a better term, will succeed. The old New Deal is lauded by some as having saved America from the Great Depression. Others claim that Franklin Delano Roosevelt only extended Great Depression I with his government subsidies and programs. I am not an expert but I tend to believe in the second theory based on my experiences in government.
The same arguments applied to Great Depression I are being applied to Great Depression II, an event which is still breaking news at the time I am writing this blog entry. Great Depression II is underway, and FDR reincarnated is weighing his options. Our incoming Lord and Savior Barack Obama will have his miracle making work cut out for him. Americans are demanding more than water into wine. They are demanding jobs, health care, a continuance of their high standard of living and probably some other funky stuff I am not paying enough attention to know about.
Tyler Cowen, in his ongoing effort to ensure that the government spends as little as possible in its attempt to stimulate the economy, cites approvingly a post by Arnold Kling arguing against a big fiscal-stimulus package, because the risks vastly outweigh the potential rewards (actually, Kling doesn’t really think there are any potential rewards from a stimulus plan). Kling enumerates those “risks” in a list. This is not a very useful list, because it contains absolutely no evidence for any of his assertions—he simply assumes the existence of his risks to be a fact—and no assertion about how likely any of these “risks” are, which makes it a little hard to do a cost-benefit analysis. Kling says that “on close examination,” the case for stimulus is weak, but, in this post, at least, he offers no such “close examination,” merely a laundry list of familiar (and unproven) criticisms of government spending. . .
The point is that it isn’t just some group of pointy-headed Keynesians saying that a big stimulus package will be good for the economy: the collective wisdom of the market is saying the same thing. And it seems peculiar for a supposed believer in the efficiency and intelligence of markets—which, as a libertarian economist, I assume Kling is—to simply disregard what the market is saying in this case. In effect, libertarian economists are saying that they have a better sense of what’s good for the economy than the aggregated wisdom of investors does. And that makes them sound peculiarly like the Platonic economic planners that they typically decry.
I’m not an economic planner. I don’t have the predictive skills of Nostradamus. All I know is that a lot of people are concerned about their jobs, including me. I know what my fallback plan is. Do you? The irony of my fallback plan is that it relies on the one function of federal government I find to be most legitimate (if also most abused) – defense. Since I am in the National Guard, there are ample opportunities to keep myself gainfully employed no matter how bad this economy gets. Idealistically I work to encourage people to think in more freedom and choice oriented ways. Practically speaking, I sometimes have to do that from within organizations that are somewhat flawed in these areas. Ah well, it isn’t a perfect world. Surviving Great Depression II will be an adventure.