It’s mindblowing that Democrats simultaneously push for $700 billion in defense cuts while demanding government retain its expansionary spending programs. Those Republicans willing to trade robust national security to avert tax hikes have deeply flawed priorities, but at least these are identifiable priorities that can be debated.
But Democrats are pushing for cuts in military spending while insisting we need more overall spending. They support increased spending because they believe large government outlays – in the Keynesian sense, where we should pay people to dig holes rather than let scared money remain on the sidelines — are good. That belief borders on sheer incoherence. And they’re doing it just as a Democratic President has embraced a doctrine that advocates the use of force, permitting open-ended unilateral warfare, based solely on humanitarian grounds. The president now decides on Tuesdays to go to war on Fridays. So we may actually need some weapons sooner or later.
If only due to argumentative decency, Democrats will need to make a choice on spending. Either military cuts or continued expansionary spending, but not both. “Spending is expansionary except when the money goes to something I don’t like” shouldn’t serve as a compelling argument. Moreover, because defense spending is typically vastly more efficient than whatever projects Democrats want to throw money at, the contemplated defense cuts appear particularly illogical.
Helpfully, the U.S. military has long had a shopping list of programs it would like to see bundled into stimulus packages. But they didn’t receive the funding they needed last time. Instead, they saw massive cuts that hollowed out our national defense – while stimulus funds were diverted to inefficient liberal pet projects.
In fact, everything else being equal, Democrats are politically and institutionally inclined to divert resources to the least efficient sectors of the economy, which is where their permanent constituencies have quite literally set up shop. Those groups — construction unions, green tech companies, etc. — not coincidentally, require government intervention to remain financially viable. That’s the deal they have with the Democratic Party. Democratic politicians insulate uncompetitive constituencies from the market via onerous regulations and the occasional wave of government fiat. In turn, those groups mobilize electorally for Democratic politicians. So we end up in a situation where progressive groups targeted for Democratic largesse are in sectors that have been most distorted by government intervention. Maybe that’s justifiable on social grounds — unions are the bedrock of the middle class, green tech will save us from rising oceans, whatever — but it’s flawed economic policy.
To take one nearly perfect example, see Mickey Kaus’ unpacking of how Davis-Bacon wage regulations, inserted into the stimulus lest union companies get outbid, detonated any chance for successful “shovel-ready” projects. Obama hoped to have people “immediately put to work.” Instead, a year was wasted because expansionary fiscal policy was secondary to protecting uncompetitive Democratic interest groups.
Also under the stimulus, bogus energy-efficient products were purchased by the hundreds of millions of dollars because Democrats liked the idea of green tech. Cities that couldn’t utilize airports got airport funds because their states had powerful Democratic senators. Teachers unions retained lavish benefits without making cuts, something the White House actually bragged about, despite studies from 2009 to 2011 showing that education funds cause at best zero expansion. Deep Blue California was especially brazen, using stimulus funds to cover unemployment benefits and pay exorbitant public sector salaries, before turning around and outright making up 25 percent of their “saved or created jobs.” Even Project Gunrunner was a stimulus project, because someone in the Executive branch wanted it that way. Why not?
It doesn’t necessarily have to be that way. The chagrin of casual libertarians aside, there are scenarios under which Keynesianism theoretically makes sense. When private investment is totally frozen, as was arguably the case after the credit collapse in 2008, there’s no intrinsically economic reason why the government can’t confiscate money and get it moving through the economy again. There are plenty of ethical arguments against redistribution and, in theory, distortions may result from expected future tax hikes. In reality, there’s no such thing as totally frozen investment. There’s something not quite right with the notion that businesspeople don’t recognize the opportunities into which their idle capital could be usefully invested. In purely theoretical terms, under this idealized (but practically impossible) scenario, the devastating “crowding out” arguments – and this recent study from the Harvard Business School shows just how devastating they can get – don’t apply. We’re already assuming that investment is frozen.
But academic Keynesian economists don’t direct stimulus funding. Elected big government liberals, beholden to permanent Democratic constituencies, are those who actually make the decisions. So as a matter of policy, if not economic theory, money ends up getting diverted into progressive causes rather than into expansionary programs.
Depending on parameters and elasticity, expansionary fiscal policy might be a good or a bad thing. It might work or it might not. But Democrats have ensured that all of the places where they want to spend money are places where that money would be wasted. If you want successful Democratic fiscal policy, you have to squeeze Democratic political priorities from spending decisions.
The defense sector isn’t completely efficient and defense procurements are notoriously Byzantine. But at least it’s not a part of the economy that’s designed by regulation to be economically inefficient. The defense spending multiplier is usually pegged at somewhere between .05 and 1, which isn’t great but is a lot more than the zero we get from funding education and plugging up state budget shortfalls. And we can be certain that defense appropriations will be spent quickly on stuff, which is what Keynesians are looking for anyway. In the worst case, we can just ship weapons over to our NATO allies, who — thanks to decades of propping up their welfare states at the expense of their militaries — are now running out of bombs to drop on Libya. At least they’re guaranteed to be used.
That’s more than we can say for the Democrats’ bureaucratically suffocating pet projects.