In defense of Nancy

Save your spitballs. Pelosi is right.

CNN’s Jack Cafferty posted a commentary yesterday blasting Pelosi for including items such as “[c]ontraception, funding for the arts, restoration of the national mall, [and] stop-smoking programs” in the House stimulus bill, “[a]ll while Americans lose their homes, their jobs, and their savings.” Cafferty said “[i]t was both childish and disgraceful.”

Not if you know a thing or two about economics.

I don’t pretend to have a PhD in economics (I leave that to Atrios, Krugman and Stiglitz), but through my schooling and work experience, I did learn enough to be able to understand the larger debate on the stimulus package. It’s about jobs, stupid.

The number one goal of the stimulus package, rightfully, is to use increased government spending to take the place of plummeting consumer demand. In a nutshell, people aren’t shopping, businesses are losing money, and to cut costs businesses are firing their employees and buying less inventory. Their fired employees and suppliers have even less money, cutback their spending, which in turns hurts other businesses which then further cut costs, and the vicious circle continues. Government spending can temporarily help fill that gap in demand. Government spending can, in a very real way, put money back in the pocket of businesses and consumers, with the intent of increasing their demand for goods and services, and ultimately getting the economy back on its feet.

It doesn’t matter what the money is spent on, in principle, IF the money is spent in a way that fills the demand gap. Meaning, if you hire a million workers to help clean up the national mall, you are not just getting a service (mall clean up), you are creating jobs – for the cleaners, the cleaning company that hires and manages them, new federal employees hired to oversee the project, the hot dog vendors on the mall, the guys who rent the port-a-potties, the taxi drivers who have to shepherd the people to the mall, the gas stations that sell gasoline to the employees who drive to the mall, the local city government that sees increased metro ridership, and income, as a result of the new employees heading to work, the accounting firm that handles the employees’ paychecks, the health insurance company that handles their benefits, the accountants that handle their tax returns, and even the Wall Street bad-guys who handle their retirement accounts. Those previously unemployed or underemployed workers now have a greater hope for the future, with more money in their pocket and a job, and with a little luck, being more financially secure, they are more likely to themselves spend more money on goods and services in the future.

Cafferty’s argument that spending on renovation of the national mall, or contraceptives, is somehow silly, is in and of itself silly. The only project that’s a bad project is one in which demand is not created (e.g., tax cuts that simply convince people to save the money they’re getting back, rather than spending it and helping fuel the recovery – there is no economic spin-off from a tax cut that doesn’t motivate you to buy more, spend more on transportation for going to work rather than sitting at home unemployed, buy new clothes for the office, grab lunch around the corner, etc. – a tax cut potentially does none of that, a new job does), or projects that are just intrinsically useless in terms of the goods and services the government is buying (meaning, it’s preferable to fund projects that increase demand but also add benefit to the country, such as building roads, schools, etc.)

Now perhaps Cafferty thinks renovating the mall, funding for the arts, and the rest is silly. I think a lot of Americans would disagree. But what Cafferty is really saying, I think, is that funding for the arts, for example, is soft and lightweight. It’s not “serious” spending like roads. And this is where Cafferty, and GOP critics of the stimulus package, show their ignorance of economics. All things being equal, there is no difference in economic impact of hiring a million road workers and hiring a million artists. Either way, it’s a million new jobs, that then creates an economic-stimulus ripple effect when those new employees, and the companies they work for, grow richer, more confident in our economic future, all the while spending more money, ultimately helping turn the vicious circle into renewed economic growth.

Again, you can debate the merits of hiring a million artists versus hiring a million roadworkers. But let’s stop playing the silly game of pretending that some projects have more gravitas than others. Even pork is beneficial if it creates jobs in the near-term.

Follow me on Twitter: @aravosis | @americablog | @americabloggay | Facebook | Instagram | Google+ | LinkedIn. John Aravosis is the Executive Editor of AMERICAblog, which he founded in 2004. He has a joint law degree (JD) and masters in Foreign Service from Georgetown; and has worked in the US Senate, World Bank, Children's Defense Fund, the United Nations Development Programme, and as a stringer for the Economist. He is a frequent TV pundit, having appeared on the O'Reilly Factor, Hardball, World News Tonight, Nightline, AM Joy & Reliable Sources, among others. John lives in Washington, DC. .

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