Give yourselves some credit: why make local govt pay high interest rates?

Krugman in Syriana poster

Image acquired from anti-Krugman article at this http://campaign2012.washingtonexaminer.com/blogs/beltway-confidential/permanent-war-and-bloody-keynesianism/283336, which I'm betting stole it from someone else. If the provable owner wants to claim it, we'll credit you -- and take it down if you want. Meanwhile, OJB salutes you!

Let’s get all intellectual to start off the week and grapple with an editorial in the New York Times by Nobel Prize-willing economist and bon vivant Paul Krugman.  Here’s an excerpt from towards the end:

Why did government spending rise so much under Reagan, with his small-government rhetoric, while shrinking under the president so many Republicans insist is a secret socialist? In Reagan’s case, it’s partly about the arms race, but mainly about state and local governments doing what they are supposed to do: educate a growing population of children, invest in infrastructure for a growing economy.

Under President Obama, however, the dire fiscal condition of state and local governments — the result of a sustained slump, which in turn was caused largely by that private debt explosion before 2008 — has led to forced spending cuts. The fiscal straits of lower-level governments could and should have been alleviated by aid from Washington, which remains able to borrow at incredibly low interest rates. But this aid was never provided on a remotely adequate scale.

This policy malpractice is doing double damage to America. On one side, it’s helping lose the future — because that’s what happens when you neglect education and public investment. At the same time, it’s hurting us right now, by helping keep growth low and unemployment high.

Luckily, we here in Orange County have escaped any effects of this economic … just a moment, what’s this?  I am informed by our staff that no, in fact, we are not only not immune from the above effects, but sort of a poster child for them.

Our Fs at FFFF are, I’m sure, happy to engage in a debate about the reduction of state and local government.  In Orange County — putting aside the crony-capitalist follies that unite reformers left, right, and libertarian in opposition — they certainly have much of the policy momentum.  And yet, in terms of pure fiscal prudence, here’s where we are.  The federal government can borrow money at next-to-nothing; states and localities cannot.

Yet, we still do have to spend, because society has not yet reached the state of profound insight where everyone realizes that our children do not need to be educated, our streets do not need to be repaired, our disasters don’t need to be prevented, and weakening of social structure in the manner of the termite is preferable to a team of green-eyeshade Republicans, libertarians, and (yes!) prudent Democrats making sure that money is spent efficiently and those of us on the left (joined by whoever will be our allies) making sure that it is spent fairly, enough to provide a reasonable “floor” for the weakest among us.  (For the sarcasm impaired — yes, that’s sarcasm, except for the hope for a transpartisan lean-but-good-government political coalition.)

Austerity at the local level isn’t saving us money; it is, by deepening the recession, costing us money, due simply to higher interest rates on our debt — the same way that the wealthy among us do not have to pay the 30% credit card rates that others of us do.  If one is comfortably situated, buffered from the effects of local, state, and national economic dislocation, that’s not such a problem; if one isn’t, it’s a huge problem — individually and collectively.

If so-called deficit hawks were truly to win the political battle over social services, so that the public signed on to gutting public education and social services generally, that would be one thing.  I’d mourn the result, but at least it would in some way be fair.  Instead, what we see now is the achievement of that result by slipping it by the public while they are not paying full attention.  Great politics, but terrible policy.  The public is not committed to dismantling the public works from the New Deal on down; until that battle is won, all the opponents of “big government” at the local level can do is make sure that the public pays more for it, in the ultimate hope that the back of the system cracks under the strain.

There’s a phrase in economics — or maybe it’s home economics, I’m not sure — called “false economy,” where one loses money by trying to save money.  (I have a gigantic jar of mayonnaise from Costco taking up much of my refrigerator that would like to testify on the topic.  Or, at least, I might.)    What we have right now is a false economy.  If the federal government borrowed money cheaply and aided the states and localities in the services that we legitimately think we need, on the condition that we don’t funnel them to those who would simply waste them, we’d be better off.


About Greg Diamond

Somewhat verbose attorney, semi-retired due to disability, residing in northwest Brea. Occasionally runs for office against bad people who would otherwise go unopposed. Got 45% of the vote against Bob Huff for State Senate in 2012; Josh Newman then won the seat in 2016. In 2014 became the first attorney to challenge OCDA Tony Rackauckas since 2002; Todd Spitzer then won that seat in 2018. Every time he's run against some rotten incumbent, the *next* person to challenge them wins! He's OK with that. Corrupt party hacks hate him. He's OK with that too. He does advise some local campaigns informally and (so far) without compensation. (If that last bit changes, he will declare the interest.)