"Hello?"
"Is this Steven?"
"Yes, it is."
"Steven, Tom Coburn."
Yes it was. I pulled over as quickly as I could and we had a 20 minute discussion about macroeconomics. I am incredibly impressed that this United State senator took the time to call a constituent for a discussion. Wow! Seriously, that is just phenomenal. It's how it should be, but we all now how busy everyone is and how many people our Senators represent.
Despite being caught off guard, I feel I was decently cogent. He spent most of his time discussing the need for confidence in our economy and worrying about inflation. Of course I brought up many points concerning the need for more spending in our economy. He agreed, but he thinks that the more than two trillion dollars currently sitting in the coffers of corporations will be spent when they have more confidence in the stability of the dollar and our nation's debt to GDP ratio. (He didn't say this exactly, but this is the gist of it. I sincerely hope I am representing his position correctly). Of course, I asked him why a company would invest in more workers and products when the economy is weak and sales are down, despite whatever our deficit happens to be. "Why would a company hire workers they don't need?" was my main question. He said that companies could be selling more right now, but they just aren't willing to take the risk on more investment right now.
Of course I disagree. If customers are demanding a company's products, companies will respond by making more products.
We also disagreed on how more government spending would affect the economy. He maintained that more government dollars being introduced into the economy right now would only increase the number of dollars and not the number of real products and services. While I am very, very pleased that he is focusing on real goods and services and not just the dollars which represent them, I am mystified as to how this would work. If unemployment is at 9%, surely no one is thinking that our nation is anywhere close to full productivity. More spending creates more sales which creates more jobs. And we have people ready for those jobs, ready to create more goods and services.
So I am not sure why he thinks more government spending right now would result in inflation and not greater productivity. And of course we would all love for companies to just start spending out of the blue, but once again, the poor economy makes people hunker down and save, which of course keeps the economy poor! Only the federal government has the ability to spend counter-cyclically, when confidence is down, which can create more spending and more jobs and then more confidence. Confidence is the symptom of a good economy, which can then turn into a cause.
Of course, I know how this may sound to some, but I do not feel that I am a proponent of "big government." I don't think the government should overly involve itself in people's private lives, from who they marry to what plant they smoke to how they spend their money. I just think the government should do its job, acting as a source of fuel for the engine of the private economy. And no one doubts that the government is source of our currency (the "fuel"), which is required for spending. The government should step up its spending when the private sector needs that spending to maintain and grow its ability to produce. And, of course, all public spending ends up as money in the pockets of private individuals.
Mr. Coburn asked me to read some Hayek and I asked him to browse through Warren Mosler's online publication "The Seven Deadly Innocent Frauds of Economic Policy", which can be found here. Then he asked me to write him another letter after our reading, and he promised me another call.
So cool!
