The stuff that flies across your desk in a newspaper office is generally interesting at any time, but especially so during hard times, when costs and budgets must be cut, especially in the public sector. We received a news release from an outfit called “Growth and Justice,” which references “pain and suffering caused by one of the most serious private-sector failures in memory,” which nevertheless is no occasion to “knock the stuffing out of our public sector as well.” It is fair to say that the attitudes expressed in it are held by most of those who believe in a bigger government as the solution to most problems.
I guess the sense of this is that if greedy Wall Street bankers and traders wrecked the economy, why should government employees and their clients have to suffer? This is an interesting viewpoint on a number of levels. It first assumes that the hand of government is clean of responsibility for the current economic embarrassment, with which virtually no one agrees. Democrats claim it is the fault of Republicans, especially Bush and Neocons who (when not mongering war) crippled the regulatory regime that would have prevented the banking crisis.
In fact, it was liberals in government who meddled in banking, forcing a degradation of mortgage lending practices designed to get low incomers into their own homes (which they could not afford, having low incomes). They then backed these bad loans with the credit of the federal government through the quasi-government banks, Fannie Mae and Freddie Mac. (You will note which were among the first institutions to require bailing out.) The result was a real estate boom fueled by easy credit forced on the marketplace by Congress, and what went up has now come down with a resounding crash. Whichever scenario suits you, the hand of government is black all over with tar from this baby.
Perhaps the weirder attitude betrayed by the Growth and Justice document is a sense that government institutions and programs kind of exist in their own right, and sort of compete with the private sector for funds that have a magical, or at least mysterious and unknowable source. It goes on: “Gov. Pawlenty’s budget compounds private-sector job loss with public-sector cuts. And...imposes disproportionate budget-balancing pain on those least able to afford more hardship.”
The proposed remedy is, of course, to soak the rich. Indeed, “Many of our conscientious top-income individuals have said that they can afford to pay more to invest in our human capital and physical infrastructure.” Barring personal intervention from Warren Buffet and Bill Gates, is is hard to understand how a private economy which is reeling can afford to pay extra to help government and its minions through hard times. And never forget, the current state budget shortfall has already been eased by a $1.8 billion injection of federal stimulus funds, which President Obama has assured us will be paid for by higher taxes on business and the wealthy.
At some point someone has to ask the basic question of where wealth comes from in the first place. The folks at Peace and Justice and their ilk seem to think that there is a finite amount of it, too much of which is lying around in the possession of businesses and rich guys, who should hand it over for the common good. They do not seem to understand or credit the notion that wealth is actually created by the industry and effort of private individuals in the private economy. Without it there can be no funds for subsequent government activities or programs. Government creates no wealth, nor jobs that are paid for by anything but the private economy.
Hard times produce less wealth than good times. That is when government expenditures have be trimmed first, until their source of funding can get back on its feet. That is why tax cuts are always the first and best antidote to recession.