This was a very interesting interview with economist Stephen Levy in the SF Chronicle. http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2004/10/24/BUGFM9E8KF1.DTL An excerpt, regarding outsourcing and even the stem cell issue (which validates my argument about the need for gov't spending): "Q: On a national level, how do you see the debate over economic policy? A: People can have honest debates about whether you move this economy forward through incentives. That's the polite version of the Bush agenda. You give tax cuts, and that's supposed to provide incentives for people to work more, to start companies, to invest. You give health insurance savings account options, you give privatization of Social Security options. That's in contrast to the view that I share, that most economists share, that there is a whole body of things that need to be done publicly. If you want to overcome the impact of outsourcing, through creating jobs to offset the ones that are eaten up, I believe you have to run a really vigorous investment economy. We have to be the leaders in health research. We have to make sure we have the largest possible number of college graduates in fields that will lead to high-wage jobs and to entrepreneurship. This economy only competes at the top end. Unless we are producing the newest good or service or Internet application gizmo, we are going to get eaten up by people who can produce (things) more cheaply. I think that requires public investment. To take the stem-cell issue, Laura Bush made the case for public funding when she said this stuff takes an awfully long time. Well, it does take an awfully long time, and the people who ran the stem-cell initiative are pretty sure, through talking with companies, that this is not something they are going to pick up. Which is why governments around the world are funding it. This is exactly the time for patient public capital. And then down the road, the private companies will jump in." And then this about the somewhat contradictory desires of people who want the benefits of public spending, but they don't want to pay for it (in terms of higher taxes ). "Q: Some conservative economists like the notion of a higher deficit because they see this as a roadblock that will shrink the size of government. Is that a way to handle the issue? A: There is a political side to allowing the deficit. What you hear normally from conservative Republicans is the desire to reduce the role of government. So this is a rather convoluted way of creating a situation where there is not enough money. They hope out of that situation that people will cut spending instead of raise taxes. I think the main part about these deficits is that it's not the politicians' fault. It's the fault of citizens. We let them off the hook by allowing the two parties to fight with each other. Those deficits persist in California and the nation because in every poll you take, folks say, "I like that spending and I don't want taxes." In California, they told Gray Davis, and they told Arnold Schwarzenegger loud and clear, "Don't cut spending, don't raise taxes." And Gray Davis and Arnold Schwarzenegger, who are very clever people, said, "Got it." And they did it. If it were popular with people to be responsible, then the political process would be forced to make the cut-spending-or-raise-taxes choice. But we seem to evade it. (It would be better) if the profession was single-focused on saying, "The arithmetic doesn't work," without (everybody) letting their particular solution come out too quickly. The main point is that the arithmetic doesn't work. If we can reach that agreement, then it will force people to deal with it."
This is actually a slightly different twist on an old argument that democracy cannot long survive once the people learn that they can vote themselves money from the public purse. No wonder economics is the "dismal science"!
