“My View” from the June 4, 2012 edition of “Viewpoint with Eliot Spitzer.”
After the dismal jobs report Friday, fair-minded people of all political stripes are asking what tools are left for revving up the economy. It feels like we’ve done most of what can be done — and yet, we’re still failing.
But that feeling is wrong. One thing that could help is a big, old-fashioned Keynesian stimulus.
First, realize we’ve tried the Republican approach. As Paul Krugman and others point out, taxes have been cut and government spending has fallen, once you adjust for population and inflation. In fact, it has not fallen this quickly since the demobilization after the Korean war. So it’s no surprise that public sector employment is way down.
But private sector job growth is only moving up in fits and starts. We’ve already driven real interest rates down to zero and beyond. So it’s hard to see how another tiny move in private-sector interest costs will stimulate a whole lot of investment at this point. We still don’t have enough demand in the marketplace to justify that. And the private sector can’t start hiring until they know that customers are coming.
But there is an answer and any businessman can see it: This is the best time for the U.S. government to borrow more money.
People want to lend us money, even at zero or negative rates. In a slack worldwide economy, the dollar and U.S. T-bills are still points of safety.
Never mind the Cassandra-like claims of the right that borrowing will drive up interest costs or ignite inflation. We’ve borrowed a lot over the past years, but neither has happened. In fact, just the opposite: rates are zero and inflation is low.
So the government should do what Larry Summers and Paul Krugman suggest: borrow and invest — in infrastructure, for research and development, and hire back the teachers and cops we need.
A myriad of investments can spur future growth and create jobs right now. We could even have a modern WPA for kids coming out of high school and college who desperately need jobs. These programs would pay for themselves in the long run.
The irony is that the stimulus in round one worked but was too small. This time, do it right.
That’s “My View.”