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Vapid govt spending argument might actually affect LA

Maybe it’s just a case of wanting to be clever – where a columnist was looking for something to write about and decided to marry a local concern with a highly-publicized national issue and to make the two fit had to create some contortions. Or maybe he actually believes it. Regardless, the idea that national economic troubles could create the conditions where grandiose solutions to flood control around New Orleans become more likely to be implemented as articulated by Lolis Elie is faulty on so many different levels.

Elie commences by writing the consequences of the credit crunch could rival those of the Great Depression. This is a projection of fabulous ignorance. As I have written elsewhere, the root causes of the two are different, and to reach those same lows the current unemployment rate would have to quadruple and the economy would have to contract over a tenth. So if Elie sets as a precondition these kinds of conditions to put his thesis in play, he has wasted an entire column on something that is not going to happen. (Even in the worse case scenario where there is something else added on, like the economic policies of Sen. Barack Obama as president, it’s unlikely that conditions would get worse than the worst period since the Depression, the Pres. Jimmy Carter years of the 1970s.)

The column also makes this isn’t the only history Elie does not know, as he labors under the misconception that Pres. Franklin Roosevelt’s failed New Deal policies did anything to get the U.S. out of the Depression. Charitably, they didn’t hurt, but they clearly did not help and in fact likely prolonged it as the economy barely budged from 1933 to 1939 in terms of output and stubbornly high unemployment. It was World War II that finally got America going, nothing that Roosevelt did. So when Elie argues big public works spending as an “untested stimulus” could work, it merely shows he is unaware of the fact that it was found wanting as a stratagem seven decades ago.

Incredulously, Elie also argues there is a disinvestment deficit of a kind (except for “war”), which he appears to define as government spending on things. One wonders whether Elie has been conscious these past several years as federal government spending has mushroomed almost 40 percent in constant dollars in the 21st Century through the projected latest budget where domestic spending has increased at only a slightly slower rate than on defense.

He even gets the impact of wartime spending all wrong. He writes that the wars in Afghanistan and Iraq have not seemed to have gotten the economy rolling, failing to understand it is not mere expenditures by government which affect the economy, but that the scale and scope of the conflict matter as to what incentives it presents in the private sector. World War II proved so stimulating because it was on a far grander scale than anything before or since requiring a huge mobilization of resources. In order to win it, the Allies had to become incredibly efficient in conserving resources (such as rubber, steel, copper, etc.) and in exploiting underutilized ones (such as the minority and female labor pools).

Such was the vastness of the enterprise that all Americans had to make noticeable sacrifices. But currently, unless a family is involved with force deployment or, most sadly, casualties, there’s barely any sacrifice going on. In short, there’s not imperative to create an incredibly efficient economy that produces much more wealth using substantially extant resources.

Finally, he wonders whether the state of Louisiana could make up capital differences if the federal government doesn’t launch a Works Progress Administration-like program. If he had been paying attention to the recent news that answer would be emphatically negative. The state appears poised to suffer a string of current expenditures exceeding revenues for the next several years so anything beyond the bar minimum the state will be unwilling to supply.

Despite the vapidity of his argument, Elie may get what he wants. After all, presidential candidates Sen. John McCain has promised some increased deficit spending while Obama has promised a lot of deficit spending. Whether that would include flood protection the way he prefers it is another matter. Yet if so, it will happen for all the wrong reasons with unfortunate implications for our national economic health.

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