I’m calling this military Lernerism and not military Keynesianism, because there’s a difference. Many people understand what military Keynesianism is–or for that matter, Keynesianism in general. When times are bad, deficit spend to put people back to work and stimulate the economy. When things get better*, cut back on spending and/or raise taxes to reduce deficits. Military Keynesianism simply refers to spending on the military as one way to do this–it’s politically popular (even if the effects are smaller than other kinds of spending).
It’s one part Cialis commercial, one part the biblical story of Joseph. But in the 1940s, economist Abba Lerner asked Keynes why he didn’t go further: rather than just rescuing a cratered economy, why not ensure full employment and full resource utilization through deficit spending, if necessary. When Keynes was first asked this by Lerner, Keynes lost his shit (though that phrase wasn’t in use at the time…). He later read Lerner’s work (here’s a summary essay by Lerner; pdf), and remarked:
It is very original and grand stuff. I shall have to try when I get back to hold a seminar for the heads of the Treasury on Functional Finance. It will be very hard going–probably impossible. I shall have to temper its austerity where I can. I think I shall ask them to let me hold a seminar of their sons instead, agreeing beforehand that, if I can convince the boys, they will take it from me it is so!
Keynes would later write a colleague, “His argument is impeccable. But heaven help anyone who tries to put it across to the plain man at this stage of the evolution of our ideas.”
Of course, the ‘reduce deficits when better’ revolves around what when better means. There are too many places and too many people who have needed and still need when better for decades*.
So it’s interesting to see a bipartisan consensus on military Lernerism (boldface mine):
One of the most controversial proposals put forward by Sen. Bernie Sanders during the 2016 presidential campaign was a pledge to make tuition free at public colleges and universities. Critics from both parties howled that the pie-in-the-sky idea would bankrupt the country. Where, after all, would the money come from?
Those concerns were brushed aside Monday night, as the Senate overwhelmingly approved an $80 billion annual increase in military spending, enough to have fully satisfied Sanders’s campaign promise. Instead, the Senate handed President Donald Trump far more than the $54 billion he asked for. The lavish spending package gives Trump a major legislative victory, allowing him to boast about fulfilling his promise of a “great rebuilding of the armed services.”
…Or with $80 billion a year, you could make public colleges and universities in the U.S. tuition-free. In fact, Sanders’s proposal was only estimated to cost the federal government $47 billion per year….
But proposals like that are written off as nonstarters, even by Democrats. In her new book, Hillary Clinton compares Sanders’s idea to him nonsensically saying “America should get a pony.” And while concerns about the cost of ponies abound, few Democrats are raising similar concerns about military spending, even when it is meant for a commander-in-chief they consider reckless and unstable.
The Senate voted 89-8, with three senators not voting, to approve the military money. Spendthrift Sanders joined only four other Democratic senators to vote against the bill: Kirsten Gillibrand of New York, Patrick Leahy of Vermont, and Jeff Merkley and Ron Wyden from Oregon. Republicans Bob Corker of Tennessee, Rand Paul of Kentucky, and Mike Lee of Utah also voted against it.
Here’s the kicker:
When Trump submitted a budget proposal in March, which cut social spending dramatically to fund a $54 billion increase in defense spending, Democrats criticized it as a nonstarter. Senate Minority Leader Chuck Schumer said he “emphatically opposed” the blueprint, and House Minority Leader Nancy Pelosi said the budget “throws billions of dollars at defense while ransacking” health and education funding.
Congress will just spend the money. No caterwauling about deficits or inflation. No quips about ponies, just the crediting of private accounts. No questions about “how will you pay for it?” The conventional wisdom is that we’ve recovered from the recession, so there’s no pressing emergency.
Lernerism is politically acceptable, as long as it’s not spent on certain people and things.
*But this might have something to do with The Privilege That Shall Not Be Named, the privilege of wealth.