Welcome the Space Aliens!

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Last month, Nobel Laureate economist and New York Times columnist Paul Krugman seriously suggested that what we need to stimulate the economy is an outside threat. Referring to the jobs created during World War II, he wrote, "If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren't any aliens, we'd be better [off]."

Well Mr. Krugman, a space alien did attack. Her name was Irene, and she is still causing havoc in the northeastern states. Billions of dollars were spent preparing for her arrival, and billions more are still being spent cleaning up her mess. Billions more were lost in opportunity costs as people stayed home that weekend, reducing the incomes of restaurant owners, taxi drivers, and other establishments owned by hardworking business people.

As it turned out, Irene didn't attack where she was expected, and many of the billions spent on sandbagging shorelines, boarding up windows, and evacuating neighborhoods were wasted. But according to Krugman, that's a good thing. We enjoyed all that economic stimulus, without enduring any of the damage. Win-win, right?

How is the alien attack working out for you, Mr. Krugman? Have you seen a big turnaround in the economy? Will you be cheering again this winter, when municipal leaders have no money left in their budgets for snow removal and pothole repair? But you don't have to wait until winter to see the results of such faulty thinking. Ask the family who spent $1,000 on gas, hotels, plywood, and batteries when they evacuated for the weekend. Because of that expenditure, they won't be able to spend that $1,000 on school clothes, a new computer, a real vacation, or even debt reduction.

I doubt that Keynesian Krugman is backing down any time soon. In fact, if an alien attack can produce so much economic stimulation, just think what a pandemic disease could accomplish! According to some cheerful historians, the bubonic plague was the best thing that happened in the Middle Ages. When the plague killed off an estimated half of the workers in Europe, supply and demand forced wages up, creating an economic turnaround that funded the continued growth of the second half of the last millennium. Wow! We ought to build a monument to those heroic fleas.

In fact, forget Obama's mantra, "Pass the Jobs Bill." Let's just pass the germs.




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Comments

Luther Jett

Krugman's prescription puts me very much in mind of the graphic novel "The Watchmen" (the novel is far superior to the film ostensibly based on it, by the way).

In fact, it's almost a direct rip-off. Alan Moore might have grounds for a plagiarism suit.

Jon Harrison

Paul Krugman is, well, a screwball as an economist. His Nobel was a political award, just like Obama's. That said, however, I doubt Krugman would call the preparations for Irene a good stimulus program. I do believe he is in favor of something altogether more systematic and long-lasting (not to mention expensive).

And while I can't agree with his bizarre claim that another few trillion of national debt is nothing to worry about, I do think it would be a worthwhile investment to start rebuilding our crumbling infrastructure. There's work to be done on roads and bridges and sewer systems and the like, while at the same time we have a million construction workers sitting around collecting unemployment checks. An infrastructure public works program would kill two birds with one stone.

The economy is teetering on the brink of recession. Of course, for millions of our fellow citizens, it never came out of recession. The unemployment rate for people with a college degree is currently 4.3 per cent. The people who write for and read "Liberty" are, I venture to say, almost all college graduates who have not spent months and years out of work. Something has to be done for the unemployed right now, for purely utilitarian reasons. The nation cannot go on indefinitely with one in six workers unemployed or underemployed. The well off can't simply hide in gated communities. Let the lumpenproletariat grow in size and become more desperate, and eventually they'll come and burn your gated communities down.

In order to save the U.S. economy, at least four major steps are required: 1) drop the corporate tax rate from 35 to 25 per cent; 2) slash discretionary federal spending -- cut defense by 25 per cent or more, phase out agricultural subsidies over five years, abolish entire departments like Education, etc.; 3) put those one million unemployed construction workers to work rebuilding roads and bridges; 4) cut mortgage interest rates across the board to 4 per cent, thereby freeing up money for consumption. Point 4 is inherently unfair to people like renters, those who have already paid off their homes, and to the banks. Only the banks would truly "suffer," but they are currently borrowing at zero per cent, so a 4 per cent return is still reasonable. The shareholders of BofA and Citi will get a haircut, and that's a shame. But the country and its economy are more important than achieving "maximum return" for bank shareholders.

Lori Heine

Actually, some of those who write for Liberty are out of work. I'm a college graduate, and I've been unemployed for over two and a half years. At least a few of our readers might be in the same boat.

I have several very good friends who live in gated communities. I live in a nice neighborhood, and they live near me. They are hiding out not because they're well off, but because they're scared like everyone else.

I certainly agree that we need to do something. Today, as I watch ten-year-old footage (yet again) of people jumping out of Trade Center windows, I celebrate my birthday. I'm resolving to do something different this year. Now I have to figure out just what it's going to be.

One thing's for certain, I'll never again trust the government to do anything for me. They're very good at doing things TO us. I haven't seen much evidence that they can do much FOR us.

Jon Harrison

I'm always interested in what you have to say, Lori. I don't really like to put myself in the position of defending government, which certainly does do things TO us, but I have to say there are some good things government has done. Was the GI Bill a good thing? I'd say it was. Unfortunately, government went too far and created a monster with the current college loan program, but the GI Bill, taken by itself, certainly helped a lot of deserving people go to college, and also helped the economy in the process.

Was the Eisenhower highway program a good thing? Sure. I'd say the public works projects that between the 1930s and the 1960s built the finest infrastructure in the world, were indeed good things. Was the Clean Water Act a good thing? Again, I'd say yes. It hasn't worked perfectly by any means, but would private enterprise have done better? Would private enterprise have done anything? There's zero evidence that it would. Are pure food and drug laws good things? Well, they led, indirectly, to stupidities like The War on Drugs. On the other hand, though, they've done some good. Certainly the meat-packing industry and the pharmaceutical industry have shown little or no capacity to police themselves. And human nature being what it is, we shouldn't expect them to. That leaves government to do the job.

I've heard the anarcho-libertarian, and the ivory tower libertarian, arguments against all of these things, and to me they possess zero power to persuade. This is why libertarianism, as an all-embracing philosophy, has never gotten anywhere and never will. In a perfectly rational world, government would be unnecessary. But we don't live in a perfectly rational world, and we never will. But there's a certain breed of libertarian -- some of them living in gated communities, some of them in Mommy's basement, who prefer utopian visions to real choices in life. Political onanists, I've called them, right here in "Liberty".

It's not clear from your remarks why your friends in gated communities are "scared" and "hiding out." But if they're afraid of what's beyond the gates, hiding out will not keep them safe forever. Idle hands are indeed the devil's workshop. Today's unemployed construction worker could become tomorrow's burglar (or worse). Put him back to work for your own benefit. We can't lock him up before he turns to crime, and in any case the prisons are already bursting at the seams. A country full of busy workers is a country with less crime. You can look up, as Casey Stengal used to say (I think it was Casey).

I'm aware, by the way, that there are unemployed college graduates. Most of them, of course, majored in philosophy rather than engineering. They have only themselves to blame for choosing the wrong career path. In any case, the unemployment rate for college grads is 4.3 per cent -- close to what's considered full employment. And those out-of-work philosophy grads probably aren't going to rape, burn and pillage if they become desperate. On the other hand, a million unemployed construction workers, rendered desperate by years of unemployment, might eventually decide to "deconstruct" the homes and other possessions of the well off. I'd say it's better to put them back to work building roads and bridges.

Lori Heine

I understand what you’re saying, and I recognize the connection between despair and desperate action. Of course construction workers and other unemployed folks need jobs. If my magic wand worked, I’d find them jobs at the same time I whipped up one for me.

Not everybody could get an engineering degree, even if they aspired to one. My degree certainly isn’t in philosophy. It stood me in good stead in the marketplace when I entered it nearly thirty years ago. Sometime after 9-11 (and I mean soon after), the industry in which I worked, insurance, began experiencing major upheavals. Everywhere I went, we got laid off – and usually our bosses, too.

I hardly think this makes us losers. Many of my coworkers and supervisors, like me, had college degrees in subjects other than philosophy. Will we take up pitchforks and torches and revolt? I don’t know. It’s tempting.

Was 9-11 somehow the catalyst for the insurance industry’s trip down the tubes? The folks at the top still make a bundle, so not everyone is feeling the pain. But I think the downturn had something to do with the regulations that are relentlessly being heaped on us. Every couple of months, it seemed, we had to be retrained (at company expense and a loss in productive time) in how to deal with them.

For an “ivory tower” libertarian, I’ve had a lot of life experience. I know people with doctorates (again, not in philosophy) who are happy, now, just to find jobs in call centers. I hope all those potentially-violent construction workers do manage to find jobs. I hope we all do.

Jon Harrison

I didn't say you or anybody else was a loser, Lori. And I hope you and everybody else looking for a job finds one. I reiterate that a public works program to rebuild roads, bridges, sewer systems and the like would put a lot of construction workers currently on the dole back to work, while giving us once again the best infrastructure in the world. It's probably the only jobs program that the government should be involved in. As for white collar job losses -- in insurance, for example -- it's been clear for some time that American business can do fine with less. Cutting employees has undeniably caused business profits to soar and maximized shareholder value. The number one priority for any public company must be maximum value for its shareholders; how workers fare comes second (or third? lower?). I think most libertarians share this view.

Of course it's obvious that everyone can't be an engineer. I could've taken up more space explicating that point, but I thought the rhetorical device I used was sufficient. Surely you didn't take my words literally?

I also didn't characterize you personally as an ivory-tower libertarian. I only know you through your writings, which don't tell me all that much about you as an individual. As for the insurance industry, maybe it is overregulated. On the other hand, I don't think that the absurdly high premium increases that my home insurer tries to pass on every single year without fail are the result of overregulation. I've been very fortunate in my dealings with insurance companies and banks: never had a claim denied or even disputed; never been turned down for a mortgage; never had trouble getting credit. Nevetheless, all my life I've seen insurance companies and banks operate in pretty slimy ways. To me it's undeniable that insurance and banking are industries badly in need of regulation. Unless one is very vigilant and pretty sharp, both of them will rip you off every chance they get. As far as insurance and banking are concerned, regulate away, I say.

Lori Heine

No question, Jon, that banks and insurance companies have been at the epicenter of a lot of the economic misery of the past few -- heck, the past many -- years. I will agree with that.

If I'd been in a different industry, would I have been treated better as an employee? Perhaps I would. Time and again I have been laid off without any warning. We were lied to about the security of our employment up to almost the moment we were dumped. One of my supervisors was a couple of months away from getting her pension when they dumped her -- after nearly thirty years of loyal service.

I don't mind not defending insurance companies anymore, and I'm sure banks are as bad if not worse. Insurance was the "family" business, so I sort of got sucked into it after college. It seemed safe (isn't that what insurance is supposed to be all about?) -- but it was treacherous.

I think those on the Left are right in some of their insights about the rich, and those on the Right in others. My progressive friends are right that an awful lot of rich people are SOB's. My conservative friends are right that not all of them are. A lot of the conflict in politics comes from the fact that so many people want to deal with only one of those two facts, at the total exclusion of the other.

I don't know what the answer is as far as government regulation is concerned. I know I don't trust it, but I don't think it's always possible to do without it, either. I come from the Left, where I was comfortably at home for most of my adult life. I have a convert's zeal for libertarianism because -- like St. Augustine's discovery of the Church -- it came to me late.

I'm still figuring it all out for myself. Liberty is one of the primary places I go to for help with this. I'm just glad it's here -- when I agree with others who write here and even when I don't.

Jon Harrison

Nice response, Lori. Loved it. It deserves to be the last word in this particular debate.

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