The real battle is over ideology: Roughly speaking, those who think larger government would be swell are in favor of spending more government money on stuff, while those who want to shrink government until they can drown it in a bathtub are vehemently opposed.
This is why I don’t pay much attention to Megan “No Longer Jane Galt, If She Ever Was” McArdle, who has not just taken the Boeing, but landed it on the Beltway where she’s become a permanent Ruling Class fixture, the tame “libertarian” lapdog.
Note the strawman comparison: On one side are those who merely want “larger government.” On the other side are those who want to “drown government in a bathtub,” that is, anarchists who want to do away with government all together.
Either McArdle is a moron, or she knows exactly what she’s doing with hackwork comparisons like these.
But if you undertake a big stimulus when the population is stagnant, or even declining, then over time, the per-capita debt burden will rise … and if your society encourages long retirements, the debt burden per-worker will rise even faster.
That may change the cost-benefit calculation quite a bit when you’re considering a stimulus program. Not so much in the U.S., at least right now, because our population is growing. But this may suggest that however painful austerity has been for Europe, the austerians still did the right thing.
And here she makes the idiotic mistake of conflating population growth with productivity increase. Increases in productivity puts more money into the pot. Mere population increases, absent productivity increases, lead to bankruptcy.
If the population increase results in a net increase in those who take from government rather than contribute (taxes, fees, borrowing, etc.) to it, then you are in a death spiral. The shrinking minority of taxpayers ends up supporting ever more drones – and that, as McArdle well knows, is exactly what we’ve seen over the demographic history of the Progressive Entitlement Era.
The only way out of this trap is for the minority to increase productivity at a far greater rate than the entitlement demographic can burn the money that comes from that productivity increase.
Is that happening?
At the moment? Not so much.
Second-quarter productivity growth was revised down to a 1.8% pace from a previous reading of 2.3%. Productivity held flat from a year ago because the increase in output was matched by an increase in hours worked.
And is that small rise in productivity enough to cover the increases in government spending and borrowing?
No. The debt that McArdle claims to worry about is still exploding, and her notion that increased productivity – at least as we see it in the real world – will change that is likely a pipe dream. The US would seem to be in a better situation than nations that are starting to lose population, but most of our increase beyond replacement are coming from immigration, much of it illegal, and that population is a net drain on the national finances. Increasing the number of non-citizens on the dole or mowing lawns and picking lettuce is not going to be enough to offset trillion dollar national deficits as far as the eye can see.
But hey: ”Libertarian” McArdle teams up with noted Nobel winner Paul Krugman to tell you otherwise. How’s that Boeing ride, Megan? Must be pretty comfortable for you to sacrifice so much in order to keep your seat on the plane.