So yes, I have learned something. Something valuable I might add…
What follows isn’t something I’m quoting directly from any one person, rather a collection of ideas that have played out over the last few weeks in posts by several RO members.
It seems that there is a pervasive beleif that Government cannot, by definition provide things of value to the economy though spending.
To show this, start with a relatively neutral definition of job: any routine activity for which we earn income. This covers a wide range of pursuits, from managing a grocery store to selling financial derivatives. It does not include cutting your lawn (it’s routine but you don’t earn income) or selling that pool table you were positive you were going to use (you earn income but it’s not routine). As for myself, I build data network, storage and visualizations solutions and in exchange my company direct deposits money into my account every month. I don’t think anyone would deny that what I do qualifies as a job.
But, those who say that the government cannot create employment are adding another element to the definition. To them, a job is any routine activity for which we earn income paid by an entity required to earn a profit. There is no compelling reason for this addendum and it arbitrarily excludes most credit unions, and other non profits, and it also excludes my local police and firefighters. By the qualified definition, they don’t have “jobs” because their income is derived from tax revenue and not private-sector sales. Ditto every single postal worker, public school teacher, Marine, sailor, airman, soldier, national park ranger, defense industry employee, NASA scientist, social worker, librarian, etc., etc. None of them has a job.
Why would someone would embrace such a questionable characterization? Because their true goal isn’t to generate a scientific understanding of the manner in which the macroeconomy operates, but to make a moral statement. Specifically, their contention is that only those routine activities financed by profit are truly of value. Everything the government does is unnecessary because if people really wanted it, they would have bought it in the private sector. Furthermore, they say, were it not for my taxes, those in the public sector would not have a job. Firemen earn a salary only because some of mine was taken away (under threat of imprisonment).
It doesn’t surprise me to know that those who espouse this view are almost always in the private sector themselves. They say, “I deserve my income because I work hard creating something of value. Meanwhile, government employees are just handed a portion of my salary for doing something no one really wants. Therefore, not only am I morally superior, but my taxes should be cut!” It’s a very convenient philosophy, but it’s not economic analysis. (From time to time, you also hear this from some that are employed, directly or indirectly by government, but they either conveniently ignore the contradiction or believe that where they work is one of the few exceptions.)
This conveniently ignores the fact that not everything that is profitable is truly of social value and not everything of social value is profitable. If we defined a job as any routine activity for which we earn income paid by an entity whose activities are socially valuable, then we would most certainly be excluding things done by BOTH the private and public sectors. How much do private sector activities like pornography, reality TV, and cigarette smoking add to our well being? Meanwhile, if we depended solely on profit for motivation, we would not have national defense, child protective services, or education (or police protection or fire protection) for the poor.
Furthermore, the means by which public sector activity is financed is more complex than anyone here understands or will admit. Not only do your taxes go to pay the salary of the fireman, but, when he spends it, his salary contributes to your wages. So who is supporting whom?
Is the government dependent on taxation of private sector salaries, or are private sector salaries dependent on sales to government institutions and employees? Obviously, they are largely interdependent and rely on the continuation of the flow between them. Largely, however, but not completely, for if one of the two can act with autonomy, it is the government. At the federal level, we can spend in deficit indefinitely and without fear of default. Something no one here thus far understands.