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This deserves an extended comment, but perhaps someone else can flesh it out.

I think it was Jerome? who produced a similar analysis for the UK (compared to France) which showed Gordon Brown has presided over a similar situation.

Perhaps Drew or someone can correct me, but to some degree this is sensible Keynsian type stuff at work? Smoothing the employment valley with government spending?

But at the same time, it's important in my view to emphasise that:

  1. Perhaps things could have been organised better? (e.g. are bombs really the most productive use of these government created jobs? Could the stimulus have been more effective if directed using different policy instruments?)

  2. All the voluminous hot air about what makes job creation happen (and why the US/UK approach is better than others) needs a seriously critical eye placed on it. This is evidence, it needs to be used to improve the models that people bandy about.
by Metatone (metatone [a|t] gmail (dot) com) on Wed Feb 1st, 2006 at 05:43:42 AM EST
But you cannot have Keynesian spending on "defence" and "government discretionary" while at the same time preaching tax cuts and a smaller government. The result is not only a budget debacle but a very real crisis in local provision of public services.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 1st, 2006 at 05:50:04 AM EST
[ Parent ]
Well, I agree.

I was conflating the US and UK situations because of parallels in the statistics, however Brown has not been engaging in the same tax cutting as Bush. (Although the Blair rhetoric has been "anti-govt" that is more focused on privatisation than actual cuts it seems.)

by Metatone (metatone [a|t] gmail (dot) com) on Wed Feb 1st, 2006 at 05:55:25 AM EST
[ Parent ]
The Browm-Blair policies are, at the end of the day, more of the traditional tax-and-spend variety. Services are outsourced, and any reductions in aggregate state spending are offset by council taxes.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 1st, 2006 at 06:06:15 AM EST
[ Parent ]
I think they prefer to refer to it as 'modernisation' rather than 'tax and spend' ;)
by Samir on Sat Feb 4th, 2006 at 10:40:17 AM EST
[ Parent ]
In a very crude way, yes, this is Keynesianism (I wouldn't call Bush's spending sensible), but you're quite right -- and I'm sure that, were he not, you know, dead, Keynes would be applauding somewhere -- that the spending could have been directed to more productive activities that would've helped to prepare America for the future -- funding for research and education, rebuilding infrastructure, whatever.

Brown is spending, as I understand the party line at the Financial Times, on much more useful activities, like public investment, police, and so on.  (Britain does, however, seem to have a problem with private investment, but I don't think Brown is the cause, nor do I think it's a long-term problem.)  The "brilliant minds" at The Wall Street Journal think it's a recipe for disaster, pointing to Germany and France, as they always insist on doing.  I think Brown will be fine, if he can get a boost from the private sector reasonably soon.  If he starts slashing spending, he may do much more harm than good in the short term, depending on how fast the BoE begins lowering interest rates.

FDR did, basically, the same thing as Bush during World War II, except that FDR raised taxes.  Hiring soldiers, nurses, manufacturing workers, etc., pushed the US well beyond full employment.  The unemployment rate fell, if I remember correctly, to about 1%.  The war provided an opportunity for Roosevelt to finally justify spending on the level that Keynes and his followers advocated.  But military spending is, in general, incredibly wasteful, even though I think it's sometimes necessary (as in the case of WWII).  I don't think spending on this level is necessary, obviously.  The entire Iraq war is an unnecessary use of lives and money.  But, getting back to the point with an example, the upkeep on nuclear (or "nukular," in Bushspeak) weapons, alone, is very expensive.

Migeru is right to point out the hypocrisy of promising tax cuts, spending increases, and smaller government.  Bush might as well tell the American people that he favors bigger, but smaller, government.  Take away the "small government" bullshit rhetoric, and Bush is essentially preaching a modern Republican form of Keynesianism, with some of the "tax cuts pay for themselves," Supply-Side talking points sprinkled in.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Wed Feb 1st, 2006 at 12:11:39 PM EST
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