spending works–eras when some group or other gets excited about future prospects and starts spending money like water are eras in which production and employment are high and unemployment low. And the government, in this respect, is just like any other group of starry-eyed optimists whose eagerness to spend pulls the economy into a high-employment high-pressure boom.
Boldrin writes saracastically,
Because demand, for no good reason, suddenly dried up, we are in trouble. People have suddenly, and irrationally, decided not to spend anymore. Hence, the government must spend even if it does not have the means for it.
DeLong writes simplistically, as if all government spending is a net increase in total spending, with no crowd-out of private spending. Boldrin writes simplistically, as if all government spending crowds out private spending, with no net increase in total spending. Generically, I think that the answer is somewhere in between. However, the specific bill that passed Congress is almost designed to minimize the net increase. The lags in spending mean that crowding out from higher interest rates can take place long before the spending even kicks in. Brilliant.
The US system is mostly private, yet the country still spends about as much public money on healthcare, in relation to GDP, as Britain spends on the National Health Service.
President Obama has concentrated enormous power on a few aides in the West Wing of the White House. These aides are unrolling a rapid string of plans: to create three million jobs, to redesign the health care system, to save the auto industry, to revive the housing industry, to reinvent the energy sector, to revitalize the banks, to reform the schools — and to do it all while cutting the deficit in half.
Crook believes that it can be done, but we might need to raise taxes a bit. Brooks, on the other hand, is actually worried that his beloved Bobo elites might not be as brilliant as they think they are.
I have two books coming out later this year. The second one is focused on the discrepancy between increasingly dispersed knowledge and increasingly concentrated political power. It’s sort of like Brooks’ column, except that I think we need to do more about it than hope that the elites come through.