Views (cont'd): Government spending

[mtbc]

I generally buy the modern variety of Keynesian economics that allows for stimulus spending when wages are stagnant and many prime-age workers are unemployed or underemployed. A poor economy causes real present suffering and inflicts long-term damage: better to incur the debt now and have tax revenues rise sooner for paying it off. Conversely, when the economy is doing well, the national debt must be aggressively paid down.

Generous welfare benefits fit well for stimulus spending: those who receive them tend to spend the money to help keep others in jobs. While the goverment can incur long-term debt cheaply, economic downturns are also an excellent time for infrastructure investment, anything that is of lasting benefit such as education, transportation and communications. In the service of keeping the economy moving, I am fine with a few percentage points of inflation, focusing specifically on the non-commodity items: if oil is more expensive but wages are not rising then I doubt we are about to turn into the Weimar Republic.

More speculatively, I am all for trying to keep things simple. For instance, I wonder if it would be practical to tax investment and employment income the same and, rather than means-testing benefits and fussing about percentage increases, simply give everybody a sufficient universal basic income as the Finns have been trying, especially if government also guarantees the provision of affordable basic food and shelter for those who ask. If neither the food nor shelter are generously lovely then I suspect that both the US and the UK are wealthy enough to meet citizens' basic needs, the real problems being challenges like mental health provision that require well-qualified staff. These thoughts feel to me like I am moving too far into foolish amateurism, like when I play an unusual chess opening and in the coming moves my opponent then illustrates that my opening is unusual because it is a bad idea.

Comments

[mindstalk]

UBI lacks the automatic stabilizer effect of welfare and unemployment and food stamps. It probably provides something of a buffer, but not the automatic growth and responsiveness.

It also involves rather higher tax rates and redirecting a large chunk of the economy. At the low end it just prevents outright misery, at a higher level it risks real disincentive to work.

Also voters are demonstrably hostile to open-ended generosity to the "underserving poor". Hell, they're reluctant to be nice to the deserving poor, or to public workers. As I put it, "it's hard enough to raise taxes to pay workers, you want to raise taxes even more to pay people to not work? And you expect the bulk of taxpayers to vote for this?"

I'd rather try real full employment policies... which is difficult enough.

[mtbc]

Yes, I was thinking more a low-end one: it should allow an abode like my freshman dorm room but not satellite television and nights out with friends at the pub: an agreeable life is too much to afford. I think there is something of a win in terms of reducing fear of how bad things could get. I also figure that, given mild misery, people who can work still will, especially if doing so would not cause them to receive less UBI. There's a lot to be said for one's misery being certainly far from outright. I am certainly willing to concede political infeasibility; this goes back to people making assertions about those they do not truly know.

As for automatic stabilizing, I guess that goes with my wanting to increase infrastructure spending, etc. during downturns: that government spending might at least prevent the number of open vacancies from falling too greatly. I'd concede that automatic would be better though.

On full employment, I did think of including some discussion of ideas like limiting the length of the working week. Though, there does seem to be a class of barely employable people: I recall chatting to one factory owner in rural Appalachia whose principal challenge seemed to be that of hiring people who could turn up reliably on time in the morning: with enough missing people the whole manufacturing line stops. I am not aware that anybody much talked to them to properly understand why there was the issue. I have been irritated by some (half-remembered) stories from England of people being required to do menial work in grocery stores essentially for free in order to keep receiving benefits when they were already working more productively and better using their actual skills in the voluntary sector so, while it could be done well, I would be leery of government's ability to manage workfare effectively.

[mindstalk]

Full employment doesn't have to mean workfare. Keynesian attempts to maintain high demand and low unemployment without getting spooked by 2.1% inflation; expansive government job programs.

[mtbc]

Ah, not letting the economy stagnate, that's fair enough and of course fits with my being fine with stimulus spending even despite a few percentage points of inflation. So, yes, with high employment UBI would need correspondingly higher tax rates to reclaim it from the many who do not need it; perhaps that is just fine as we already tax income progressively so we can target them.