Maine news, sports, weather | Kennebec Journal, Augusta, Maine
Thursday, September 9, 2010
GORDON L. WEIL: Should government spend more or less to beat recession?
One single debate dominates all political decision-making today, whether it’s in Greece, Spain or the United States. Should the government try to cut spending and reduce its high debt, or should it borrow more and pump added funds into stimulating the economy?
Even in Maine, where a deficit is banned by law, the debate takes place, focusing on borrowing versus spending cutbacks.
Those who favor more stimulus spending make a good case that, without what has already been spent, the country would have fallen deeper into recession. Government is a big customer for goods and services, and when it spends, people find new jobs.
This is what used to be called “pump priming.” People with government-funded jobs spend money, thus creating more jobs. After a while, the need for government-backed jobs declines, and the new income tax revenues that are generated can be used to pay off debt.
On the other side are those who say that piling on more debt creates a burden on taxpayers, possibly for generations to come. If taxes have to go to pay off debt created years earlier, then government will have to raise taxes to fund its operations or cut back.
They say that if people do not get government support, they will be forced to try harder to find jobs. So denying extended unemployment benefits is the best way to get people back to work.
The problem with using benefit-denial as a way to motivate people to look for work is that jobs have to be available. No amount of job searching will create new jobs.
Still, that point aside, both sides of the argument have merit.
What complicates matters is that raising taxes is off the table for most countries. If taxes are increased on people who are already struggling, the chances for recovery are reduced.
Of course, some bonus babies on Wall Street could chip in a few more dollars. More tax revenues from the super-rich or “claw backs” of some profits from banks that received government support would help.
Yet another obstacle to resolving the question, especially in the United States, is the role of those, such as tea-partiers, who are intent on reducing the role of government. For them, deficit reduction is a good tool for forcing government to cut back. This position, while influential, has little to do with economic recovery.
At the recent meeting of the major economic players of the world, the Group of 20, the United States wanted governments to agree to pump more funds into their economies. But most participants were intent on deficit reduction.
If the majority is right, most of the world is in for a lengthy recovery during which people will have to learn to do without much of what they formerly routinely bought — from video games to big vacations to eating out. And it is quite possible that, when recovery has been achieved, our buying patterns will have to remain more modest.
That reality, however, is hard to sell politically. People blame the Obama administration for not creating jobs, but they oppose the only real tool available: spending public funds.
The political campaign this year, including in Maine, will focus on the proper role of government. Some will say government programs should be cut to the point that taxes can be reduced. They will say tax reduction is the best economic stimulus program.
To be sure, in most countries it is past the right time to screen government programs and eliminate some of them, even if they are worthy.
But tax-cutting arguments will run into popular sentiment, the kind of reaction that has caused riots in Europe. People like the programs from which they benefit. It is not yet clear that people are ready to accept the kind of austerity that deficit reduction would bring.
Opponents of tax and spending cuts will say the highest priority is getting people back to work, with which most people can agree.
Will it be possible for voters to understand the trade-offs being offered to them? Will they recognize that government cannot provide job creation and social safety nets and cut spending at the same time?
These big questions will make this year’s elections among the most important in decades.
Gordon L. Weil, a weekly columnist for this newspaper, is an author, publisher, consultant and former international organization, U.S. and Maine government official.
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13 COMMENTS
Jack_Pine said...
Cut the spending programs.
July 15, 2010 at 2:50 AM Report abuse
reddevil974 said...
cut the govermnent spending ,cut the size of goverment,involvment ,commo sense regulation and cut taxes if you can do these thing then the United States and the state of Maine will not only bounce back from this depression it will grow exponentially
July 15, 2010 at 5:44 AM Report abuse
TiredMainer said...
Sunset welfare benefits and help only the truely needy. Not the young welfare couch potatos.
July 15, 2010 at 7:10 AM Report abuse
rogerthat said...
We've got to come to grips with the fact that the social welfare state is unsustainable. The leeches will complain, they may even riot like in Greece, but we have to end the perverse incentives that discourage work and encourage dependency.
July 15, 2010 at 9:01 AM Report abuse
Goldwater said...
"Will they recognize that government cannot provide job creation and social safety nets and cut spending at the same time?" Of course it can. Cutting the corporate tax rate is one easy way and it doesn't involve spending a dime. Cutting the rate would encourage businesses to stay in the US, reinvest revenue and grow, which, amazingly, might create a job or two! Unfortunately, some Democrats prefer to squeeze more money out of businesses while at the same time strangling their ability to grow. Create a profitable business environment and the jobs will follow.
July 15, 2010 at 9:19 AM Report abuse
Divinity said...
Gordon asks, "Will it be possible for voters to understand ...?" _________________________________________________________________________________ Early responders provide part of the answer - viele verstehen nicht.
July 15, 2010 at 9:57 AM Report abuse
O_o said...
is there really an @%$$# debate after we spend more than a trillion dollars with results like this? to rational people, obama has shown that Keynes is dead. but the liberals will, like they do with all of their programs, insist the reason it hasn't worked is that it hasn't been tried enough.
July 15, 2010 at 10:09 AM Report abuse
Simpkin2 said...
Government stimulus spending will not help in the long term as long as we continue offshoring the jobs that used to make middle class Americans prosperous. The infrastructure provided by government spending on our transportation and financial systems (to name just two) is what has allowed our citizens to become unimaginably wealthy by world standards; cutting our infrastructure would reduce us to the state of many developing nations. Ending wasteful and unwinnable wars would be one way of reducing government spending to a manageable level.
July 15, 2010 at 10:53 AM Report abuse
C-Fairer said...
I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle. -Winston Churchill _________________ Giving money and power to government is like giving whiskey and car keys to teenage boys. -P.J. O'Rourke, Civil Libertarian_____Government is the great fiction, through which everybody endeavors to live at the expense of everybody else. -Frederic Bastiat, French Economist (1801-1850) In general, the art of government consists of taking as much money as possible from one party of the citizens to give to the other. -Voltaire____What this country needs are more unemployed politicians. -Edward Langley, Artist (1928 - 1995)
July 15, 2010 at 10:59 AM Report abuse
Ripple said...
I'd suggest reading the bi-partisen report from the Debt Commission, you can easily Google it, in short, this country is screwed unless we reduce spending immediately, It points out that the Federal revenue covers only Social Security,Medicare and Medicaid. all other dicretionay spending by our government including fighting two wars, is on BORROWED MONEY, mostly from China ($920,000,000,000) among some other counties. If serious reductions are not taken immediately, we will be paying over $2,000,000,000,000 in interest alone!!
July 15, 2010 at 1:10 PM Report abuse
TJ said...
Government create only jobs for more government that the public must pay for which leads to the other thing government creates : DEBT!
July 15, 2010 at 3:43 PM Report abuse
DTOM said...
"The political campaign this year, including in Maine, will focus on the proper role of government." ++++ The 'proper' role is a LIMITED ROLE. ++++ Governments derive "their just powers from the consent of the governed". (We the People.) ++++ "Government must be limited in power if Individual Liberty is to be safeguarded." ++++ "History, in general, only informs us what bad government is." - Thomas Jefferson ++++ "If Congress can employ money indefinitely to the general welfare... they may appoint teachers in every state... The powers of Congress would subvert the very foundation, the very nature of the limited government established by the people of America." - James Madison
July 15, 2010 at 8:42 PM Report abuse
Izzy said...
Gordon Weil has absolutely NO PEOPLE SKILLs. He's mean, meanm mean.
July 16, 2010 at 8:04 AM Report abuse