Tomorrow Never Knows

by Don Boudreaux on August 6, 2013

in Budget Issues, Debt and Deficits, Politics, Seen and Unseen, State of Macro

In my latest column in the Pittsburgh Tribune-Review I criticize perspectives on economic policy – especially that of Keynesians – that unduly diminish the importance of taking account of tomorrow in addition to today.  A slice:

Deficit spending is one key way that governments supply extra goodies for current voters without having to immediately inconvenience anyone. The bill for paying the debt comes due in the future. And because many future voters aren’t yet born, passing the buck — or the trillions of bucks — in this way is especially easy to do.

This political reality gives a great deal of unfortunate credence to Keynesian economics — the antiquated brand of economics resurrected in fake-scientific garb by John Maynard Keynes in the 1930s.

Keynesians assure business people, politicians and voters that the dominant problem with the economy is inadequate spending. If tomorrow doesn’t matter, then this assurance makes sense. Because artificially jacking up demand today yields relief today, that’s all that matters if tomorrow is irrelevant.

If tomorrow doesn’t matter, only calloused ideologues indifferent to suffering would oppose any policy that brings relief today at the expense of tomorrow. Only the most cold-hearted eggheads would suggest that today’s high unemployment might reflect problems with the economy that run deeper than inadequate spending — problems that require time to solve in ways that assure the economy’s long-run health. Only the sadistic would oppose plans to relieve pain today on the grounds that such plans will make things worse tomorrow. Tomorrow, remember, doesn’t matter.

So spend today. Spend a lot. And keep spending until all workers are employed today. As long as unemployment is high, don’t worry that spending today is excessive. Just as using — spending — a valuable dining-room chair as firewood today isn’t excessive if tomorrow doesn’t matter, using resources today to maintain today’s pattern of economic activity and employment isn’t excessive if tomorrow doesn’t matter.

Today. Here and now. That’s the focus of self-described “practical” pundits and politicians — the latter of whom have especially strong incentives not to look past the next election. For such pragmatic folk, monetary and fiscal policies aimed at improving tomorrow appeal only to ideologues and misanthropes if those policies do not yield maximum possible benefits today.

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