By the way, my last comment applied to this issue in particular. I am not claiming that conservatives never have such arguments but that in this case they seem to be clearly in the situation of having to defend an indefensible position.
This is not a liberal vs. conservative topic. It’s realists vs. fantasists. It’s embrace of fact vs. embrace of lies. It’s knowledge vs. ignorance. It’s what we’re all about here.
If that includes some momentary pleasure that the boundaries of ignorance have been pushed back, well hell, we’re entitled. If the particular ignorance has been advanced and defended particularly belligerently, or hatefully, or dismissively, and has even gotten good people killed, then yes, even some celebration is appropriate.
If the belligerent ignorance in question has been closely associated with a particular political orientation, then what does their new-found knowledge mean to them and what should they now do about it? There’s a debate topic for you. Discuss.
Jshore, I think you’re missing a step in terms of 9/11 and increased security spending boosting the economy.
Because the spending is done almost entirely by the government it tends to lack a level of ‘multiplier’ in terms of generating economic growth. That is, if I (as a businessman) invest X money in a project I do it because I expect it will generate X*1.25 in return. And all the vendors I deal with are thinking that same way (or they should…at least). So by the end of it all my $X has multiplied by several factors in terms of economic activity and dollar value.
When the government spends money it tends to lack that as they’re not interested in getting a financial return on their spending. The money is spent, certainly, and that sets off a multiplier effect, but the initial level of it is missing. And that removes the largest multiplier level.
Also, all this spending is offset by the fact that it’s largely deficit spending. But having to borrow (to this point) $500 Billion dollars the government forces up interest rates across the board (fewer dollars available to be borrowed by business and consumer demand) and slows economic growth. And those that do borrow at the higher rate end up paying a greater amount of future dollars for past borrowing rather than investing in future projects.
I’m also unsure about the wisdom of ‘Wars help economies’. Even after WWII there were some very hard times as those businesses that had geared themselves hard for war production (weapons, supplies and the like) found themselves without a customer. Retooling at that level can be expensive, both in dollar and human terms, as both the cost of retooling and getting rid of people who were hired for war production and aren’t needed for consumer production can be a drag on the national economy.
The economy had been in a recession for the first 3 quarters of 2001. Then 9/11 comes and the economy recovered. The attacks certainly did not hurt the economy.
This is true. i’m tired of people trying to use this as a litmus test of lib vs con. If it were an effective delineator, then Pat Buchanan would be a liberal.
Richard Cohen was making the exact same point this morning:
Well, I suppose there is a grain of truth in all this but not that much. For one thing, your multiplier of 1.25 is considering a prety generous return on investment. It seems to me a factor of 1.10 would be more in line (looking at interest rates, increase in stock prices, …), at least over the long term. And, I don’t understand the part about “the largest multiplier level”. The thing about a multiplier factor is that it multiplies by the same value whether you multiply it first or at the end. (In other words, multiplication is commutative.) A factor of 1.10 is a factor of 1.10 no matter where it occurs.
Finally, one could argue that government can get return on its investments too. If the investment is in education, for example, it can get a good return. All because that investment isn’t pursued by the market at large, perhaps due to market failures, does not mean there is necesarily no return on it.
Well, the Bush Administration and the editorial page staff of the Wall Street Journal apparently no longer believe in this silly “Rubin economics” stuff and the latter have written lots of silly editorials purporting to prove it wrong.
Be that as it may, I do agree with you that some scenario like this is likely to play out over the long term. Over the short term, I think the record low interest rates we currently have indicate that this can’t be having too much effect on the economy yet. And, this isn’t too surprisng given that Fed policy is currently at the point of practically paying people to borrow money! So, you are giving a good reason why the Bush “borrow, cut the wealthy’s taxes, and spend” economic policies may be bad over the long term but it would not explain why 9/11 is having a negative effect on the economy now.
Again, these are sort of bigger picture / longer term issues where I would not really necessarily disagree with you. Keep your eyes on the prize here. What I am arguing against is the idea that Bush has done a wonderful job by using an supply side / trickle-down approach to the economy and this is evidenced by the fact that the economy is not in worse shape than it is despite 9/11. My point is that the response to 9/11 has provided quite a bit of Keynesian stimulus to the economy in terms of increased spending (by the government but also by private entities) on the military and security. My guess is that it is largely this … and the small amount of Keynesian stimulus produced by the Bush tax cuts to the extent some money actually went to people who spend it …that is producing the help for the economy. And, that the supply-side giveaway to the rich is providing extremely little stimulus bang for the buck (which is why this recovery has been pretty anemic, especially in terms of job growth so far). Of course, this isn’t just my idea…As, I noted, I basically stole it from Krugman who actually is an economist unlike myself.
Here is an excellent piece by Robert Kuttner discussing both the political and economic aspects of this curious debate.
As a non-economist, I was trying to argue only yesterday the potential of the 87 big ones a year (spent both directly and indirectly on Iraqi reconstruction) having a Keynesian effect on US.Plc some time prior to Nov 2004. If anyone has any links on that (he says more in hope . . ), it’d be appreciated . . .
Speaking of North Korea – the Bush Admin is pressuring South Korea to send troops to Iraq. Kim Jong Il must be thrilled! Yet another example of how we are “safer” after the invasion.