Friday, March 05, 2010

Hamburgers and Derivatives

Paul Krugman has an op-ed column in today’s New York Times on the subject of Jim Bunning’s block of the Senate bill last week and earlier this week. It should be noted that Senator Bunning did not object to extending unemployment benefits, he objected to creating more government debt and was insisting that offsetting spending cuts be made or taxes imposed to pay for those benefits. Krugman attacks Republicans for being principled against unemployment benefits. I’m not defending Bunning, but Krugman is shooting a horse that Bunning was not riding.

Take the question of helping the unemployed in the middle of a deep slump. What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment. That’s because the economy’s problem right now is lack of sufficient demand, and cash-strapped unemployed workers are likely to spend their benefits. In fact, the Congressional Budget Office says that aid to the unemployed is one of the most effective forms of economic stimulus, as measured by jobs created per dollar of outlay.

The emphasis was added by me because I want to make a point related to my post earlier today regarding an economy based on spending. What, precisely, are people going to buy that generates jobs in this country? The only thing that comes to my mind is hamburgers and financial instruments. Can you buy a television made in America? No. You can buy a car assembled in America, but almost all of the parts were made overseas, and buying a car right now isn’t going to generate a new job because the dealer lots are overflowing with cars.

So, hamburgers and derivatives. As to the first, I’m with what my Dad said of the then-called service-based economy, “Hell, we can’t all make a living selling each other hamburgers.” (Although he did like a good burger.)

Financial instruments are home grown, but they are entirely negative to the “spending economy” that Paul Krugman is so fond of, and the fees that are taken by the traders are entirely negative to any kind of economy. I’ve never been all that enamored of the segment of our economy that “makes money by selling money” as opposed to that which makes money by producing worthwhile products.

And I’m not all that convinced that we can “all make a living selling each other televisions, derivatives, and information” either.

No comments:

Post a Comment