A rebuke of Keynesianism

You want to make a liberal mad, tell them that big government spending doesn’t work in boosting the economy. Want them to get really mad tell them you have proof. The standard understanding of the Keynesian economic policy, for those who don’t know, is that the government is the spender of last resort. When consumer spending is weak the government should step in and start spending. It doesn’t matter so much what the spending is because it is a question of getting the money flowing. This gooses the economy enough to keep it from running aground. I can point to at least one instance in the last 30 years that such exuberant spending failed to boost the economy in any traceable way.
No I’m not talking about the stimulus. I’m talking about the decade long war on terrorism. There is simply no question in my mind or anyone’s mind about the impact of the news on Sunday. America, nay the world is better without that kind of evil around. Even the Dalai Lama made comments to this effect. With the death of Osama Bin Laden though, it is a good time to look at the actual cost of our war on terror. The wars have cost trillions of dollars, a price I’m sure very few have any buyer’s remorse over. I’m not being critical about this in any way, at least not today. No, I’m talking economics, and according to the Keynesian theory that much spending should be good at priming the pump of any economy on the planet. Yet if we look at the last decade even before the financial crisis growth was meager at best. By some estimates the cost of our actions in the Middle East may only be eclipsed by the cost of World War 2. And remember World War 2 spending is pointed to by everyone as the thing that finally ended the great depression.
This current spending on the other hand has shown no appreciable effect on our economy. In fact it is a picture perfect example of what critics hate about Keynesian spending. Mainly that it is often wasteful and larded with fraud you know the stuff KBR, Halliburton, and Wackenhut(the naked bonfire party security company) are accused of. It also failed to produce things people actually use, I mean unless you have a desire to strafe the mongoose that keeps eating your vegetable garden with an unmanned drone.
So how is it that Keynesianism has failed so spectacularly? The fact of the matter is that not all governmental spending is Keynesian. The economic theory isn’t about willy nilly indiscriminate spending. It is about using the heft and size of government spending to boost demand in targeted sectors of the economy that are lagging. This worked in World War 2 because a ton of money poured into the manufacturing sector which in turn invested in the machinery they would later repurpose to create a myriad of consumer products and automobiles. There is little chance that the technology created to fight this war can be repurposed for civilian use, mongooses aren’t even native to our soil. It is therefore unlikely that the economy will benefit much from the current war on terror.
The truth is this war spending has largely been sucked down a hole and will never really be recovered. If even half of that money had gone to the states we wouldn’t see record layoffs of teachers and have a crumbling infrastructure. If half of that money went to investments into alternative fuels and high speed rail we’d be far less dependent on foreign oil. People will argue that the war and all the changes in things like airport security and NSA wire taps were needed to achieve Sunday’s news and that we will need to continue all the military spending to keep America safe. But isn’t the reason we prepare for war so we can live in peace? Likewise do we not desire security to protect that which we desire to save? Right now there is a debate over whether we should cut government spending a little or a lot. Despite the job growth numbers announced today people are still struggling. The jobs people are getting now pay lower then the jobs they lost in the great recession. We have a long way to go and the government will need to play a vital role in our continued recovery. If you believe as I do, that America is so worthwhile to spend as much money as we did to protect it, is it irrational to think we should spend a fraction of that amount to keep it strong?

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