Quick, More Stimulus!

June 9, 2010

by Mario Rizzo  

More than thirty-five years have passed since Friedrich Hayek said in his Nobel speech, “The Pretence of Knowledge” (1974):  

“The theory which has been guiding monetary and financial policy during the last thirty years… consists in the assertion that there exists a simple positive correlation between total employment and the size of the aggregate demand for goods and services; it leads to the belief that we can permanently assure full employment by maintaining total money expenditure at an appropriate level.”

Paul Krugman, Brad DeLong and others are now calling for bigger and better stimulus in the hopes of decreasing unemployment more rapidly. Most of this is wishful thinking or, should I say, value-signaling.  If you care about the poor and middle class, if you realize the irreparable harm that long periods (months, years?) of unemployment may cause, if you recognize the many unmet public sector needs we have, you would doubtless advocate more fiscal stimulus. In an equation: Good Person = Advocate of More Fiscal Stimulus. 

How tiresome all this is. The political-power aggrandizement crowd meets the special interests, the economically ignorant, and the naïve value-signalers to concoct more spending schemes. Oh yes, let’s also throw in well-meaning but wrong economists.  

Let us take this opportunity to think more carefully about the idea of fiscal stimulus and its connection to reducing cyclical unemployment. The argument seems to rest on a kind of “jump start” phenomenon. Spend money and recipients will spend, and the multiplier takes over. Aggregate income will rise and jobs will materialize.  

There are many objections to this simple perspective that modern economists (and classical ones) have advanced. There is no need to review those in any detail here. However, they include such factors as: offsetting reductions in spending as people save more in anticipation of tax increases, decreases in future growth because of higher interest rates later, and inflation that cancels any increase in real aggregate demand. (For a new-Keynesian view of the limits of fiscal stimulus including immediate crowding out of private spending, see here.) 

The argument that Hayek made in his Nobel speech severs the connection between aggregate demand and employment. While it is no doubt true that specific demands will affect employment in specific industries or sectors, it does not follow that “demand in general” is relevant outside a deflationary context. 

The key issue is the sustainability of demands. Suppose the government spends more on construction projects. It must bid those resources away from other industries and out of “idleness” (which can mean search activity oriented to finding otherwise-sustainable employment). What will be the result for employment of labor? 

It makes little sense for suppliers and other industries affected by the increase in construction spending to increase hiring significantly if they do not believe that the particular spending patterns they observe are sustainable or if they have doubts about their sustainability. Firms will increase output mainly by utilizing existing inputs more intensively or by temporarily hiring more labor.  

Recent employment figures lend support to this view. Employment increases have been restricted largely to the government sector or the construction industry which has been temporarily stimulated by a combination of monetary and tax-credit policy. This is not the jump start of Keynesian theory. 

Continued fiscal stimulus along the same lines – say, more infrastructure construction spending – in order to produce a semblance of sustainability cannot be continued indefinitely. Deficits will continue and the cumulative debt will rise. If policy is averse to real interest-rate rises, monetization of the debt becomes the likely scenario. However, these low interest rates would ensure that the misallocations of resources and excessive risk-taking that caused our problems will not be corrected.

36 Responses to “Quick, More Stimulus!”

  1. John V Says:

    What you elaborate on in your final reasoning is the key.

    Capital is not simply “k”. It is not play dough to be molded and twisted.

    Stimulus spending ignores heterogenity of capital and it ignores the reasons why some capital is idle and some isn’t.

    Reallocation and knowledge problems cannot be solved by centralized will.

  2. Mario Rizzo Says:

    This is a good point. If capital (and labor) have specificity then the government must try to spend along the lines of the specific resources in existence. In other words, it must try to duplicate what the market would do. And there is the “pretence of knowledge.”

  3. Daniel Kuehn Says:

    “It makes little sense for suppliers and other industries affected by the increase in construction spending to increase hiring significantly if they do not believe that the particular spending patterns they observe are sustainable or if they have doubts about their sustainability.”

    Right, but didn’t Keynes say this too? Unless I misunderstand you, you seem to be acting like this is somehow distinct from Keynesian theory, which is here just reduced to “jump start” logic. I’m thinking specifically of the chapter on “money wages”, but I’m sure it’s elsewhere as well.

  4. John V Says:

    Thank you, Dr. Rizzo.

    I once wrote a somewhat messy, off the cuff layman’s criticism of the stimulus along these lines here at this now defunct blog:

    http://swordscrossed.org/diary/20090131/stimulus-your-thoughts-going-forward

    I admit that I have never taken econ beyond high school and I’m sure it shows in various ways. My “teachers” were mainly Hazlitt, Sowell and Hayek through words. And all this before I ever learned any Keynesian principles. What I learned from Hayek and the others along with Public Choice made Stimulus reasoning really hard for me to swallow. Too many glaring holes from a POV where the economy is so “organic” and complex. I visualize a recession like a computer defrag screen. It takes time and I don’t see how generically and aimlessly ramping up production ans spending is going to solve anything beyond next week or next month….all while never addressing the discords that caused the problem.

  5. John V Says:

    That’s true, DK.

    But that doesn’t seem to matter to the people who prescribe stimulus in his name. And THAT is what the issue is now…not the vagueries and subtle points of what Keynes said.

  6. Mario Rizzo Says:

    Daniel,

    Yes. You are right on Keynes’s position in a certain respect. Keynes did not really advocate counter-cyclical spending but rather the permanent *stabilization* of investment spending through what he somewhat misleadingly called “the socialization of investment.”

    I discussed this point here:

    http://www.american.com/archive/2009/february-2009/taking-the-name-of-lord-keynes-in-vain

    Unfortunately, the editor gave this a title I don’t like.

    BTW, when I mean Keynes, I say Keynes. “Keynesian” is a whole other story.

  7. Daniel Kuehn Says:

    John V –
    RE: “But that doesn’t seem to matter to the people who prescribe stimulus in his name.”

    Could you explain a little? I’m not sure who this doesn’t matter to. This isn’t a subtle point. And even in the last few days there’s been a debate raging in the econ blogosphere about the role of expectations in determining the comparative merits of fiscal and monetary policy. It’s easy to write off people as being “crude Keynesians”, but I’d contend this is very much on people’s radar screens.

    Mario –
    That’s interesting about your distinction between Keynes and Keynesians, but I’d give “Keynesians” a little more credit on points like this. You do raise a very important issue that I think is very misunderstood. Keynes primarily provides a theory of output, not of the business cycle. People often are thinking of business cycles, and try to squeeze Keynes into that box. That’s bad for two reasons: (1.) the General Theory really isn’t a solid cycle theory, and (2.) it misses the real contribution of the General Theory as a theory of output. I think a lot of people would be surprised to learn that Keynes doesn’t really even talk about the business cycle much until one of his concluding notes at the end.

    That isn’t to say that I think counter-cyclical fiscal policy, etc., are entirely inconsistent with Keynes. But it’s not the primary implication of the theory of effective demand.

  8. Daniel Kuehn Says:

    PS – ya, if he knew what assumptions people would jump to with the term “socialization of investment”, I think he would have chosen a different, less confusing phrase!

    After all, the first example he gives is joint-stock companies! It’s not the first thing people think of when they hear “socialization of investment” out of its proper context!

  9. Daniel Kuehn Says:

    Sorry for multiple comments, but I should also note – I think a lot of our concern (meaning Keynesians) is that you speak of “stimulus” as if we’ve really had any. Yes, Congress passed a package but we live in a federal republic. The macroeconomy doesn’t know the difference between a federal dollar and a state and local dollar. And states and localities have been neutralizing a lot of the federal stimulus.

    You see no Keynesian jump start and conclude there’s something wrong with fiscal stimulus. I see no Keynesian jump start and say “well of course there isn’t any – there was no stimulus to react to!”.

    I think this is the source of a lot of people talking past each other lately.

  10. John V Says:

    Sorry, DK.

    But actions and intentions speak far louder than…well…whatever it is that you are trying to convey.

    This is about Stimulus. It’s merits, demerits and results. Period. As Dr. Rizzo states, notable economists wanted a lot of stimulus, they got it….though they wanted even more. Now they want more…still. You tell me where the concerns being discussed here are? Enough said.

  11. John V Says:

    DK,

    And yet, influential Keynesians like DeLong and Krugman swear up and down about much worse things would be right now had we not any stimulus. So which is it??

    Hardly an exceptional post by DeLong here. We hear this theme about what an even more terrible world it would be now without stimulus all the time:

    http://delong.typepad.com/sdj/2010/06/david-leonhardt-on-the-ratf-understanding-the-us-reponse-to-the-great-panic.html

  12. Daniel Kuehn Says:

    “And yet, influential Keynesians like DeLong and Krugman swear up and down about much worse things would be right now had we not any stimulus. So which is it??”

    I’m not sure where the contradiction is. If my position is “it’s bad the states are cutting but at least the feds are filling the hole”, doesn’t it stand to reason that I would also say “and it would be even worse if the feds weren’t filling the hole”?

    You can’t sensibly make one claim without the other!

  13. John V Says:

    DK,

    I’m talking about the incredibly convenient “have it both ways” themes of convenience:

    -It would have been worse without the stimulus

    -We didn’t really have a stimulus due to government failure to do it right.

    Which is it?

  14. Roger Koppl Says:

    You are right about signaling goodness, Mario.

    I recall sitting at a table with a group of economists in about 1983. A Keynesian at the table sharply queried the others about what they would prescribe for monetary policy given a recent report that capacity utilization rates were down. It was all very uncomfortable. When it came my turn I tried to lighten the mood by saying glibly that we should get rid of the Fed. She narrowed her eyes and hissed, “I find that highly immoral!” My two-word response is not fit for reproduction in this forum. She really thought I must be a bad person if I did not agree with her on monetary policy!

    Now, the economist in question was a sincere person who sincerely wished to help others. She subjected me to a lengthy cross examination on whether “other people’s jollies” mattered to me. She decided I was a fine fellow after all once she was finally assured that my shocking opinions in monetary policy sprang from the very same desire to improve general welfare as here desire for expansionary monetary policy.


  15. To return to Mario’s original point: the “stimululs” is counter-productive to the extent that it results in spending on activities that need to contract. Overall, consumers want to raise their savings (i.e., future not current consumption). Housing prices needed to fall, not be propped up.

    Most of all, the bloated public sector needs to contract. Preventing that downsizing has thrown a disproportionate share of the adjustment onto the private sector.

    Capital is specific, and so is labor. Demand is specific, not aggregate.

  16. Mario Rizzo Says:

    Jerry’s comments are the issues in a nutshell.

  17. downunder Says:

    I like John V’s analogy of a defrag screen.

  18. Jim Rose Says:

    A link provided by Greg Ransom on Marginal Revolution about Australia’s fiscal response to the great depression has led me to do some digging.

    My results may be of interest to this blog’s discussion of a fiscal stimulus.

    My digging discovered that both Australia and New Zealand (NZ) implemented sharp fiscal cut-backs in the early 1930s.

    There were 20% cuts to any government spending that could be cut including old age pensions and the imposition by law of significant wage cuts across the whole economy. Regime certainty was a priority and talk of government debt renegotiation was dealt with harshly and currency devaluations were resisted.

    Both countries recovered rapidly from their Great Depressions, which were in 1931 as deep as that in the USA.

    These recoveries from their great depressions were by 1935 for NZ and 1937 for Australia.

    I have lived in both these countries most all my life so finding out today that both Australia and NZ implemented classical economic policy responses to their great depressions is rather embarrassing and shows the power of the popular history taught in high schools and universities.

    With commonality with the US myths about Roosevelt ending the U.S. depression, the income first Labour government is often credited with ameliorating and even ending the NZ depression.

    The first labour government was elected in November 1935, when the NZ great depression was over!

    The popular history in Australia focussed on Joe Lyon’s quitting the Australian Labour Party to join with the conservative parties as their Minister of Finance and then Prime Minister to implement an austerity plan. The success of that plan is never discussed. Lyon’s own party wanted to spend their way out of the depression.

    I might add that after the election of free spending labour government in NZ in late 1935, there was an economic downturn in 1937 and an exchange rate crisis in 1938!

  19. John V Says:

    Thanks Downunder.

    That how I visualized it as I started to understand the idea of recession as misallocated capital and labor being moved to find better uses. It takes time….piece by piece. And there’s really no way to rush it or plan it. As Jerry underscored on the the idea of heterogeneous capital a few posts up, capital and labor are specific….not “k”. Untangling bad “capital structure” (if you will) doesn’t get solved by perpetuating it with stimulus…even if the best-case theory of stimulus actually worked (which it doesn’t). For once the busy work is done and the money has been handed out to influential bidders, you still have bad allocation of resources that need to adjust. Multipliers don’t change that. They simply ignore it and hope it “goes away”.


  20. David Brroks opines on the issue today and presents the case for fiscal stringency.

    http://www.nytimes.com/2010/06/11/opinion/11brooks.html?th&emc=th

  21. Troy Camplin Says:

    First point: redistribution of riches does not create wealth, it destroys wealth. Thus, a “stimulus” that creates government jobs won’t work.

    Second point: When the government passes a “stimulus bill,” that is a signal to the citizens of the country that the economy is in terrible shape (after all, the government wouldn’t have to pass a “stimulus” bill if the economy was in good shape). Thus, people will continue to act as though there is a recession, which includes the threat of possible future unemployment. People believe, rightly or wrongly, that the government has experts who know how well off the economy actually is. So when the government passes a stimulus package, they are telling people that the economy is worse off than perhaps even they think it is. Thus, people will behave negatively to the information, slowing the economy.

  22. Roger Koppl Says:

    Troy,

    I think we should distinguish stimulus from relief. The bad consequences of relief should be weighed against their good consequences, which consist in part of mitigating the immediate difficulties of persons thrown out of work because of a policy-induced trade cycle. Mises defended liberalism as “a system that feeds the hungry, clothes the naked, and houses the homeless” (1927, p. 4). I think he had it about right.

  23. RickC Says:

    Mr. Koppl,

    A follow up question to your point about Mises. Would his idea of liberalism as “a system that feeds the hungry, clothes the naked, and houses the homeless” insist that providing relief is a necessary or even desired function of the federal government?

  24. Bogdan Enache Says:

    The fiscal stimulus programs already adopted and the automatic social spending increases have helped fueld the looming public debt crisis everywhere. There’s no way new stimulus programs can be adopted without the risk of serious problems.

  25. Roger Koppl Says:

    @ RickC

    Well, for *me* it implies the desirability of unemployment insurance and other state transfer programs. If Mises disagrees, so much the worse for Mises. But I won’t evade your question.

    First the detail of what level of government should do what. I don’t have a problem with the federal government, rather than state governments, providing relief. I think there may be legitimate issues about concentration of power, but such issues are minute compared to similar issues arising with regulation and corporate welfare. Plus, some federal programs went into place at a time when some states could not have been trusted to put good programs in place or administer them fairly. Jim Crow and all that. Now to Mises.

    Mises does have some statements rejecting “welfare,” including statements seeming to express a preference for private charity over state support. Nevertheless, I don’t recall any really strong statement in Mises that unambiguously smashes any possible program of transfer payments. I found a statement in Human Action opposing the sort of social insurance created under Bismark (p. 839 of 3rd ed). Mises said that the problem with such schemes is the “elimination” of the “incentives” to stay fit and avoid accidents. I don’t really know how it worked under Bismark, so I’m not sure what is and is not covered by Mises’ statement. Presumably, however, it does not cover negative income tax, which preserves the right incentives at the margin. And, of course, the margin is where the action is.

    I think the following statement in Human Action is important:

    —————
    Credit expansion and inflationary increase of the quantity of money frustrate the “common man’s” attempts to save and to accumulate reserves for less propitious days. But the other procedures of interventionism are hardly less injurious to the vital interests of the wage earners and salaried employees, the professions, and the owners of small-size business. The greater part of those assisted by charitable institutions are needy only because interventionism has made them so. (p. 838 of 3rd ed.)
    —————

    We have interventionism and loose money. Should we work on eliminating the transfer programs that would be less necessary if we have sound money and nonintervention? Or should we keep such programs until such time as we can eliminate interventionism and loose money? Presumably, you agree with me that we should kill “welfare” last, not first. Actually, as a bit of a statist, I’m not sure personally that we should ever kill social insurance altogether. The bigger points, though, are that 1) we should work *first* on sound money and nonintervention, 2) the need of state transfer programs would be much less without loose money and interventionism, and 3) the complexity of social order makes it hard to determine the optimal set of transfer programs in the (sadly) totally unknown world of sound money and nonintervention.

  26. Troy Camplin Says:

    Roger,

    I agree with you that we need to be careful about the order of things. I recall even Ayn Rand pointing out that income taxes should be eliminated only after everything else is gotten rid of, and she was pretty radical about income taxes (and I’m not entirely in disagreement with her on income taxes).

    I think it is important that we understand that there is literally no such thing as wealth distribution. Such schemes are necessarily welath-destroying. One can accept that and still favor redistribution of riches. But we need to acknowledge what it is we are doing.

    A stimulus bill that creates government jobs is not creating wealth. Government jobs rarely if ever create wealth. The creation of government jobs by the stimulus bill will redistribute money from wealth-creators in the economy to government workers who do not create wealth. That is bad for the economy.

    As someone who thinks we need to slowly dismantle the government system we have in the direction of a Constitutional minarchy, I think that something like a negative income tax would be a good transitional program from the deeply corrupt welfare system we now have (someone should speak to my wife about her experience as a social worker dealing with people on welfare). I don’t know if a fully free system can ever be realized — compared to the world definition, the U.S. has no poverty to speak of, yet people still insist on welfare programs to “help” people who aren’t poverty by anyone’s defintiion but an American’s, so I doubt a completely classical liberal system can be realized.

    I do not think that Mises intended anything like welfare in his definition. He believed that it was the free market and the free market alone that would deliver such benefits — and that the government prevented people from realizing these benefits, especially when it sought to help them.

  27. RickC Says:

    Thanks for responding Roger.

    Troy’s response actually has me thinking that he and I discussed this once in the comments at Econlog and we seem to pretty much agree. So, I won’t retread his argument concerning the economics of redistribution and relief.

    My wife, like Troy’s deals with the reality of the welfare state every day as a pharmacist and her experiences are all negative. I worked in Florida for a couple of years with a social service program and my own experience reflects exactly my wife’s and Troy’s wife’s, and everyone else’s I’ve known or spoke with who actually worked in a social services field. Dependency, free riding and corruption seem to be the dominate themes. The depressing part for me was in discovering how few deserving, “needy” people you come across while doing this type of work. By that I mean actual “victims” of anything other than their own behaviors; alcoholism, drug abuse, gambling, multiple out-of-wedlock childbirths, running up excessive debts, refusal to secure or keep a job, etc. And what ends up happening is that the relief actually becomes a subsidy to those negative lifestyles. We subsidize their drug habits, alcohol binges, gambling etc. So when weighing the good-bad consequences of “relief” you can understand my struggle to find how the good of federally or even state run welfare comes close to outweighing the bad.

    The view that the organization (government) which stands to benefit most from keeping a large portion of the populace dependent on it should organize and manage our society’s relief programs seems problematic. I lean toward private, locally run relief organizations for various reasons I won’t go into here.

    I don’t disagree with your point about corporate welfare and regulations though and we could expand it to include welfare for the middle-class, farmers and other recipients. All should be ended, hopefully in the least painfully way possible, but I’m not too optimistic of that happening.

  28. Roger Koppl Says:

    RickC:

    I hear you about abuses of the welfare system. At the same time, I wonder whether you might not be underestimating the difficulties facing many poor Americans. Getting and keeping a job is a big deal. But minimum wages make it hard for poor teenagers to get a job, as suggested by the perennially high unemployment rates for black teens. It’s hard to get a job if you enter your 20s without work experience. So minimum wage laws help to prevent many poor people from developing a good job history. For many poor people, lousy public transportation makes it hard to get to job sites more than walking distance from home. Licensing restrictions designed to help taxicab companies prevent jitneys from entering the market and providing low-cost service.

    Licensing restrictions also prevent you from hiring your neighbor to provide child care. Thus, a snow day becomes a day you don’t show up to work. You may have more sick days because licensing restrictions on healthcare prevent healthcare providers from serving you at affordable prices. If you live in a “food desert” then your health and vigor receive yet another challenge.

    And then there are false arrests, arbitrary arrests, and random police beatings. Consider cases exposed in our three biggest cities.

    The 1994 Mollen Commission Report documented arbitrary police beatings in NYC. In Chicago in the 1970s and 1980s Lt. Jon Burge and police under him seem to have been routinely torturing confessions out of persons arrested for crimes that include murder. The Rampart scandal in LA the late 1990s we had unprovoked shootings, unprovoked beatings, planting of evidence, framing of suspects, stealing and dealing narcotics, bank robbery, perjury, and covering up evidence of these activities.

    One legal restriction after another prevents the market from coming to poor people with services and opportunities. And the really central state function of protection is too often turned against many of our nation’s poor. These restrictions and abuses lower the opportunity cost of behaviors middle class persons often label irresponsible. I suppose transfer programs might subsidize “irresponsible” behavior in some degree. It seems to me, however, that any such subsidy is small potatoes compared to police abuse and alienation from the marketplace and the larger social division of labor.

  29. Troy Camplin Says:

    The evidence seems to support both views. My wife’s expereience was of people who worked very hard at cheating to stay on the system — and cheating the system at every turn. Every opportunity offered was turned down or subverted. I would love for an economist to sit down and talk to people like my wife who experienced what those on welfare did to stay on welfare. If they put that much hard work and ingenity into the economy, they would all be wealthy entrepreneurs, let me tell you. Instead, they primarily use those skills to avoid work.

  30. Roger Koppl Says:

    Troy,

    Unfortunately, I’m not sure how to translate your wife’s experience into a numerical estimate of fraud among those on relief. I guess that limits how far we can push the discussion in this forum. I would like to respond to one think you said, however.

    You said, “If they put that much hard work and ingenity into the economy, they would all be wealthy entrepreneurs, let me tell you.” But if my account of the difficulties facing many poor Americans is true, then this statement can’t be right. To become a wealthy entrepreneur you need the rule of law and access to markets. The point of my litany of difficulties is to say that these two things are absent from the lives of many poor persons. They are systems features that do not depend on the character or behavior of the individual. We should be more conscious of the legal restrictions and security problems that frustrate peaceful market exchange for poor Americans.

  31. RickC Says:

    Roger,

    I appreciate every thing you wrote in response and I know anecdotal evidence counts for squat. I can’t dismiss my and others’ experiences and observations though. And wow, that was quite a list of state emplaced obstacles and abuses you offered in your last comment for the “poor” to overcome. I was of course aware of them and many others.

    So the state sets up most of the obstacles that keep so many people locked in poverty and then runs the programs that are supposed to alleviate the suffering that they’ve, in large part, helped create? There is something seriously twisted about that.

    I’m not trying to be prickly about this but I think I do appreciate what the “poor” face as I come from about as poor a background as you would expect to find in the U.S. – think white, southern, rural; not the same issues as those faced by an inner city black youth just a whole list of other issues. A friend has tried to argue with me that it’s all about human capital (the support, education and experiences that I lucked into – especially as a white male). But then how to account for the fact that out of four siblings, two of us (one male, one female) pulled ourselves out of poverty and and two remain mired in it? That’s the mystery of poverty to me, especially in the U.S.

  32. Roger Koppl Says:

    RickC:

    I hope I’m not being totally obtuse, but I didn’t get the sense of your remark “There is something seriously twisted about that.” What’s twisted? Is it the fact that our political system squashes the poor with one hand and lifts them up (a little) with the other? If that’s what you meant, what is your read on which is more important, the squashing hand or the lifting hand?

  33. Troy Camplin Says:

    Personally, I think they hand they pretend to lift with also squishes. Consider Walter Williams’ argument in The State Against Blacks.

    My wife is Hispanic, and she has a Master’s Degree. She was raised by her grandparents, who instilled in her a strong work ethic — so it was almost as though she were the child of immigrants. Her siblings mostly have the attitude that somebody ought to be taking care of them — they were all raised by her mom and step-father, who did not instill a strong work ethic. There is likely more to the story, such as choices of friends, for example, but this reflects something that my wife has observed about the Hispanic culture. The immigrants and first generation are hard workers; by the third generation, there is high percentage on welfare.

    One might also consider the fact that immigrants from developing nations who are racial minorities do spectacularly well compared to similar native minorities.

    I was raised in rural Kentucky, myself — around mostly very poor whites. My experience is that it’s cultural, not so much governmental, except where the government encourages the persistence of the culture. It may have been governmental once upon a time, but more and more it is less and less a factor.

  34. RickC Says:

    Roger,

    Sorry if I wasn’t clear. In answer to this: “Is it the fact that our political system squashes the poor with one hand and lifts them up (a little) with the other?” Yes and no. Yes that system is twisted but, even more . . .

    I find it twisted to expect the same organization, the federal government, that squashes the poor with one hand (policies and actions like the partial list you provided above) to actually care about lifting the poor back up. Call me a cynic but I would lean more toward the idea that the government uses the other (sleight of ) hand to toss just enough support to the poor so as to create dependency upon it and its largesse. Wasn’t this what Tocqueville was talking about in his chapter on despotism in democracies? What if government’s control over the lifting hand is what expands its power and enables its squashing hand to get heavier?

    I don’t disagree with you about the need for a lifting hand. I just differ with you on the question of from where that lifting hand should emanate. My wife and I have tried to help with a little lifting ourselves. Our experiences reveal how very difficult it is to do this successfully even at the personal, one-on-one level. The top down, impersonal, federal government aid model appears to me to be fraught with pitfalls even if carried out with the best of intentions.

  35. downunder Says:

    Jim,

    As a fellow Aussie, I am interested to learn more. Can you supply references?


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