You can email Mr. Fitzpatrick at Jkfitz42@cs.com. This article originally appeared in The Wanderer and is reprinted with permission. To subscribe call 651-224-5733.
I have argued that there is no reason to back these programs if we are convinced they are wasteful and ineffective — or, even worse, counterproductive, creating a permanent underclass dependent upon government handouts. There is nothing uncharitable about calling for a dose of “tough love” for the poor, or what Daniel Patrick Moynihan once called a period of “benign neglect.” The social encyclicals do not prohibit us from coming to such a conclusion.
So I hope no one will suspect that I am a closet socialist if I take issue with the free-market assumptions of one of my favorite columnists, Charley Reese. Opposing creeping socialism and the inefficiencies of the welfare state is wise and just. But a knee-jerk, ideologically inspired opposition to the federal government’s role in the economy can lead to a distorted view of how the world works. Pope John Paul II struck the right balance in Centesimus Annus, when he instructed that the market must be “appropriately controlled by the forces of society and by the state so as to guarantee that the basic needs of the whole of society are satisfied.” State intervention in the economy is often inefficient and a threat to our freedom. But not always. There are lines to be drawn.
I submit that Charley Reese failed to draw them in a recent column. He permitted an ideological pre-disposition to lure him into a wrong-headed generalization, one that not only conflicts with Catholic social teaching, but is also bad math. Reese’s target was the current attempt by the Congress and the President to come up with a stimulus package to lift the economy out of its current doldrums. He doesn’t think they can do it because, he says, all the “government can do is redistribute income.” Rather than help the country as a whole, he argues, “government spending stimulates the economy of the particular people and corporations who get their hands on it.“ He explains why: “taking money from A and giving it to B is not good for the economy. If you add a minus and a plus you get a zero, and zero effect is what most government spending has on the real economy.”
Well, okay — up to a point. If the government taxes from me the $100 I was going to spend on a new coat and gives it to a welfare recipient, who then buys a new coat, the economy has not been stimulated. The same $100 gets spent. A poor person — deserving or not — has been helped, but no additional economic growth has occurred.
But not all government spending is in this category. When one calls for government spending to stimulate the economy, the idea is to promote spending that would not likely take place in the private sector. And the federal government is able to do that, at least some of the time. The feds have a track record of spending foolishly and wastefully, often more for pork barrel political purposes than to serve the commonweal. But there are examples where federal spending has worked well. I would argue that the Interstate highway system, projects such as the Hoover Dam, and the federal dollars that maintain our ports and inland waterways fall into that category.
We must keep in mind that the impact on the economy of federal spending is not inherently wasteful. If Americans take a portion of their savings and use it to buy cars, the ripple effect goes into effect. Assembly line workers, car salesmen, and graphic artists at the advertising firms that create car ads earn salaries because of this private spending. They in turn spend those dollars on food, clothing and entertainment, generating jobs in those sectors of the economy. The impact is the same when the federal government taxes your money from you and spends it on a highway or construction at a military base. Highway workers and construction workers are hired. They earn salaries that enable them to buy cars and take trips to Disneyland. Their spending creates jobs and salaries in the automobile industry and in the shops and restaurants around Disneyland. When the federal government spends money, it spends your money. The stimulus effect is there, just as if you had spent those dollars on your own.
But here’s the key point: when private consumers are reluctant to spend, as they seem to be at this time because of the impact of September’s terrorist strikes, the federal government can step in to take up the slack. They can tax away from you the dollars you are reluctant to spend, and spend them — on roads, bridges, highways, military bases, national parks, rebuilding the Pentagon and lower Manhattan. Doing this will initiate the ripple effect that leads to economic growth and job creation.
Free-market critics will sometimes challenge this notion by pointing out that the New Deal attempt to stimulate the economy did not lift us out of the Depression; that it took the great boost in spending that followed upon the outbreak of World War II to do that. This observation leaves me scratching my head. I sometimes wonder if these critics understand the implication of what they are saying. Their argument rests on the premise that federal spending did not successfully stimulate the economy until it became truly massive during the war years, when federal tax dollars paid the salaries of millions of soldiers and defense workers, creating the needed ripple effect. Which means…federal spending does stimulate economic growth, when it is at the appropriate level for the economic dislocation at hand; that it might take a lot of federal spending to get the job done.
Please don’t get me wrong. I am not saying that federal spending is always beneficial. In fact, I have a predisposition to think it wasteful. But it is not always wasteful. It depends. There is a difference between an Army Corps of Engineers’ project that opens profitable shipping lanes on the Mississippi, and some handout to a “community outreach” program in the Bronx that was conceived more as a payback to local Democratic party bosses than to serve any public good.
The social encyclicals urge us to evaluate each proposal for federal spending on its merits, by the standard of subsidiarity, that is, by asking ourselves if it fulfills a proper and necessary function of the national government. To do otherwise is to be an ideologue, even if a right-wing ideologue.
