Princeton economics professor explains the economy — and gets it very, very wrong

Do you ever listen to Frank Caliendo?  He’s a talented impressionist who spends much of his time ragging on John Madden.  One of the things Caliendo claims that Madden does is restate his premise as if it’s a different conclusion, i.e., “Here’s a guy with mud on his jersey.  When you mix dirt and water, then you’re going to end up with a muddy jersey.”  You can get a flavor of what Caliendo does with Madden from this clip (and get nostalgic for George Bush, whom I miss greatly):

I thought of Caliendo’s take on Madden when I read Alan Blinder’s Wall Street Journal opinion piece supporting Keynesian economics.  To appreciate fully the wonders of Blinder’s writing, you need to know that his mini bio explains that “Blinder, a professor of economics and public affairs at Princeton University, is a former vice chairman of the Federal Reserve.” In other words, he once had a hand in managing America’s money supply and is now molding America’s best and brightest young minds.

When I started reading the piece, given Blinder’s credential, I thought there was a real possibility that I’d suddenly realize that my decade long flirtation with conservativism was all wrong, and that I’d return to the Progressive fold with renewed fervor.  After all, this guy promised to explain why the GOP is engaged in myth-making when it contends that Democratic jobs spending actually kills jobs, rather than creates jobs.  I anticipated serious arguments about the effect of government money on the economy, complete with statistics about long-term job creation, the growth of business, and the decline of welfare rolls.

What I got, instead, was Madden-esque.  Blinder carefully explained that government spending on jobs creates jobs because . . . get this! . . . it creates jobs.

As far as Blinder is concerned, a job is a job is a job, whether it’s government created or not.  As long as the government isn’t raising taxes to create jobs, it’s a good thing:

The generic conservative view that government is “too big” in some abstract sense leads to a strong predisposition against spending. OK. But the question remains: How can the government destroy jobs by either hiring people directly or buying things from private companies? For example, how is it that public purchases of computers destroy jobs but private purchases of computers create them?

One possible answer is that the taxes necessary to pay for the government spending destroy more jobs than the spending creates. That’s a logical possibility, although it would require extremely inept choices of how to spend the money and how to raise the revenue. But tax-financed spending is not what’s at issue today. The current debate is about deficit spending: raising spending without raising taxes.

Blinder fails to take into consideration the fact that, as compared to the private sector, government jobs are excessively regulated; government responds slowly, if at all, to market forces; government jobs are less efficient producers and money generators than private sector jobs (indeed, many generate nothing but make-work); government programs, whether managed by the government or a third party are more prone to fraud than private sector work; and the massive heft of government perverts the market place, whether it is acting as a buyer or seller of jobs.

The end result of this excessive bureaucracy, inefficiency, and corruption is that government jobs ultimately shrink the fund of available money.  Even if there’s an initial jobs bump (although the stimulus proved that to be a canard too, because there was no bump), in the long run money poured into government jobs shrinks the fund of available money in the private sector, lowering the amount of taxes the government takes in, thereby decreasing the government’s ability to create make-work jobs.  It’s a downward, shrinking spiral.

Blinder is wearing blinders.  His belief that a job is a job is a job is ignorant beyond belief, and ignores entirely the reality of government jobs programs.  Eventually you end up with the old joke from the Soviet Union:  The Soviet Union and a chain gang both have full employment — and both for the same reason.