In a standard college-level course on macroeconomics, a student will see an equation along these lines:
Y = I + C + G + (Ex - Im)
The economy's total output (Y) is a function of private investment (I), private consumption (C), net exports (Ex-Im) and the subject of today's post, government spending (G). This will not be a discussion of "output gaps", "multipliers" or other econometrics, but rather an attempt to humanize a discussion that for the last three years has focused on abstractions instead of narratives. In other words, this isn't a post about what size "G" should be, but about assessing whether or not it supports pie making.
Here's a cautionary tale of "G" gone wrong.:
The first is an article from The Washington Post about food stamps becoming a town's economic engine. William Easterly tells almost exactly the same story in his book, about a "temporary" relief program rewards the very need it is supposed to eliminate. However, it would be cruel at best, and socially destabilizing at worst, to just cut off this support suddenly without some kind of replacement.
At first, this story supports Ronald Reagan's assertion that "the scariest seven words in the English language are 'I'm from the government and I'm here to help.'" Here "G" supports economic output, but Congress certainly did not intend to have food assistance become a treadmill of dependency. However, its tools are blunt and correcting their unintended consequences means overcoming both bureaucratic inertia, which generally favors reducing its own costs over providing effective services, and entrenched interests such as unions, Big [Industry]
Small wonder, then, that much of the debate and sound bites as we enter our "fiscal Great Harbor" focus almost exclusively on the size of "G" with little or no thought to where it actually goes. This is a half-baked discussion. There are clearly good, important things that the government provides which doubtless enhance national pie making capacity. But a simple focus on the top-line number forces us into a form of hasty generalization, equating all of the outputs with their best or worst manifestations.
As a free and educated people we should be able to engage in a more productive debate. If you agree, and can help roll a crust or hold a baby for your pie maker, let him know. He'd like to discuss whether we can define good "G" in a way that could survive rulemaking and support pro-pie interest groups.
