Shortly after I read about the supposed "stimulus" effect of the money spent to rebuild the Middlebury Post Office plaza, I read a persuasive argument against such tax- or borrow-and-spend government initiatives in the pages of the Intercollegiate Review.
In the current issue, author/historian/amateur-economist Thomas Woods uses the forgotten Depression of 1920 to prove his thesis, that Keynesian/Oobamian deficit/stimulus spending prolongs and worsens depressions/recessions, exactly contrary to what the government-spending proponents argue.
The 1920 depression was swift and deep; there was no government intervention (in fact, government cut taxes sharply and spending even more sharply, leaving more disposable income (and spending/saving/investment options) in private hands, and within a year it was all over, except in agriculture, where chronic commodity over-production caused by continuous productivity advance and no supply management has plagued the industry while pleasing urban consumers for most of the last century.
When I was an undergraduate, the Keynesian theory of government deficit spending to cure economic downturn was taught in Econ 101 as a law of nature right up there with the Newtonian one on gravity, the Boylesian/Carnotian three on thermodynamics, and the Vitruvian three on architecture. Equally unchallengeable then were the Piltdown Man's skull and plate tectonics in Bones 101 and Stones 102, the former getting a "yes" and the latter getting a "no".
Now we know that the skull was a human-cranium/ape-jaw fraud and floating-mobile continents are real. Even Maynard Keynes is beginning to be challenged, my old Econ lecturer, and the we-are-all-Keynesians-now pronouncements of Milton Friedman in the 1960s and Richard Nixon in the 1970s notwithstanding.
Usually, the anti-Keynesian argument says that government spending doesn't have the multiplier effect of private sector spending, some anti-Keynesians presenting statistics showing that tax- or borrow-and-spend actually generates less economic activity than it prevents by removing the money from the free market by statute.
Consider, for example, the Harvard University economists Barro and Redlick Wall Street Journal article of Oct. 1, in which they write "Our new research shows no evidence of a Keynesian multiplier effect. There is evidence that tax cuts boost growth".
A different anti-Keynesian argument comes from Woods, who argues that there are two grades of spending, the "lower-order" category covering ordinary consumer goods, and the higher-order category describing long-term research and development. His theory is that it's the occasional natural downturn in economic activity which reduces interest rates and "stimulates investment in long-term projects..." without which productivity and the overall standard of living don't improve, and "the trouble comes from too much consumption spending and as a result too little channeling of spending into...higher-order stages of production..." such as happens during a prolonged spike in consumer spending. When government declines to "stimulate", interest rates drop and more of the slower-return-on-investment R&D becomes feasible.
Middlebury's post office vanity project certainly isn't a higher-order R&D project, although the monies it absorbed-$29,450 from Montpelier in a free-money grant based on taxes of OPM (Other Peoples' Money) and $18,550 from the local Downtown Improvement District-wouldn't be enough to fund one. Equally, the monies would have improved overall productivity more if spent on roads or tele-communications than on exposed-aggregate pavement, street furniture, and two trees and flowers worth of landscaping.
If you find Mr. Woods' thesis persuasive, you'll opine that the near $50K would have had more impact if left in taxpayers' pockets where it might well have gone into investments (Econ 101, savings always equals investments because very few people any more put gold coins into treasure-chests or under mattresses) including those in the higher-order R&D category.
As an Addison Eagle letter writer, Flanzy Chodkowski of Middlebury, put it recently, "If the State of Vermont insists on giving Middlebury all that money, couldn't Middlebury save it in a rainy day fund?" There it would, together with other investments, go into the longer-term R&D which would fund gains in-for example, to please enviro's, maybe solar panel research-or other forms of productivity enhancement which would then benefit everyone. "All that money" isn't all that much; as Sen. Everett Dirksen once mused, it takes several billions to get to real money. But it would be a start.
Chodkowski also observed, "The State of Vermont has no money, and yet it had $29,450 to give Middlebury for this beauty project," meaning that there's an attitudinal problem in government regarding the judicious spending of tax-derived OPM. The state constitution, like most others not much respected any more, speaks of "frequent adherence to principles of frugality" and therefore isn't much consulted by the Golden Dome folks these days.
But then many state constitutions, Wisconsin in 1848 for example, speak of all land holdings being "allodial" and not feudal, meaning they can't be seized by government for any financial reason. That's another subject for another time.
Retired Vermont architect Martin Harris now calls Tennessee home.
Former Vermonter Martin Harris lives in Tennessee.