The View From 1776
The GSA’s Keynesian Stimulus Program
Why are we upset that the GSA spent a reported $823,000 on a party for themselves?
If anything, Paul Krugman and his fellow liberal-progressive Keynesian economic worshippers should castigate the GSA for spending far too little. After all, it’s a fundamental principle of Keynesian economics that saving (what used to be called prudent regard for the future wellbeing of our heirs) causes economic recessions.
According to Lord Keynes, when workers spend less than what they are paid, each bit of saving reduces aggregate consumption and drags the economy down. Keynes recommended that government spend as much as possible in order to counter the theoretical drag of saving on the economy. The nature of government spending, in Keynes’ theory, is immaterial. Government could employ people to dig holes one day and fill them on another, endlessly repeating this useless activity.
The GSA’s party was in this grand tradition of Keynesian theory.
- Of course the GSA people who authored this mess should all be fired for this vast waste of taxpayer money (and many will be). There is no excuse for this kind of waste, whether under a Republican or Democratic administration.
However, on your theoretical point, Thomas, while this conference expenditure was extravagant and unjustified, from a purely economic point of view, the funds were not totally "wasted." If the money had been burned in an incinerator, that would have been a total waste. In the sense that the many low wage service people who worked for the convention, the bicycle suppliers, the caterers, etc., all benefited from the outlay. They will take home some of that money and spend it for groceries and other necessities, and thus, as the Keynesian model suggests, keep the economic engine turning.
So, while I would have preferred that the $823,000 had been spent on a more durable end product such as, say, rebuilding one of crumbling bridges, we will see some economic pump priming as a result of that expenditure, even if it was foolish.