Raising Keynes
Why L.A. voters tasked themselves some whole new taxes
He was born the year Karl Marx died in 1883. He was 6-feet-6-inches tall, married a ballerina, and once claimed to have made a pass at Albert Einstein. And he changed modern economics for all time in the years between the end of World War I and the end of World War II. He was John Maynard Keynes, whose theories underlay the Western World’s economics policies until the era of Ronald Reagan, whose personal economic prophet, Milton J. Friedman, grabbed the action in the early ’80s. To oversimplify vastly, Keynes held that when the economy gets truly tough, the government should get going by pumping money into the system, creating jobs and building enduring things the community really needs.
The Friedman school maintains that the government shouldn’t do anything; rightist ideologue Grover Norquist notoriously wanted a government “small enough to drown in the bathtub.” Worst mistake of all, the wisdom went, would be to let the shrunken government regulate the finance industry.
Well, we just saw how that one turned out, didn’t we? But over the past quarter century, this nation and California (Reagan’s political kindergarten) have increasingly abandoned the idea of government ministering directly to public needs. This changed the political narrative. So even now, with the economy thoroughly off the rails, the same brand of punditry that still insists that Obama’s win was a center-right success story also proclaims that the worst thing the new president could do would be to inject Keynesian stimulus measures into the economy. “A greatly increased presence of the central government in a country’s investment sector could constrict innovation and lower the quality of the innovations that are made. We would be left still in a slump,” wrote Nobel Prize winner Edmund Phelps, with unapologetic economic elitism, in the Financial Times. During the campaign, John McCain, like Herbert Hoover before him, vowed “to cut government spending.”
On the other hand, U-Mass Professor Robert Pollin proposed in The Nation green stimulus programs “to generate the largest possible employment boost” and “strengthen the economy in the long run, not just through a short-term money injection.”
This month, local voters went with Pollin. Pre-election commentators wondered how Los Angeles city and county voters could be expected to vote for new taxes on their homes to support $4 billion in new community college spending and $7 billion in new schools for the still-distrusted Los Angeles Unified School District in the worst economic downturn in 21 years. Let alone another $40 billion in sales tax over 30 years for roads and rapid transit and $10 billion to finance state bonds for Jetsons-style bullet trains to San Francisco.
That’s the way we’ve all been taught to think since 1981. How easy to forget, even for those of us who were around at the time, that President Reagan’s reign began with one of the biggest government stimulus packages of all time – a tax cut for high incomes that goosed the U.S. economy all through that decade. The problem is that successor Republican presidents, particularly including the incumbent, drove the reward-the-rich, ignore-the-poor approach into the ground. That’s one reason we’ve got both the greatest divide between rich and poor in modern history and the national economy on life support. The whole thing ended in the disastrous $700 billion bailout of the improvident, under-regulated finance industry that helped bring Obama to power.
Now, at least in California, the public seems to think that’s enough of this. That if government is going to squander billions, best that the spending benefit everyone.
This isn’t really a government giveaway like the Wall Street bailout was. Californians and Angelenos are going to pay for all these projects out of their taxes, sooner or later. The critics keep saying it’ll be years, even decades, maybe a generation before the projects are completed. But there is such a thing as posterity, and voters sensed that this was what Pollin meant by “strengthening the economy through the long run.” We remember that public works projects long past have given us the Coast Highway through Big Sur; the landscaping of Griffith Park, the Arroyo Parkway, and much else beside.
Of course it wasn’t just the voters who figured all this out. The least savory of all the initiatives, the Prop. Q school bonds, had strong support from the contractors and building-trades unions. At least one local business group was willing to break with supply-side wisdom and back all the initiatives. “The voters sided with business by supporting critical initiatives to improve our economy and quality of life for years to come,” said Gary Toebben, president and CEO of the Los Angeles Area Chamber of Commerce.
City Council President Eric Garcetti added his plaudits: “I think that with the passage of bond measures for transportation and schools, Los Angeles voters sent a clear message that even in these tough economic times, they want to see investments in our infrastructure.”
Let’s hope that message gets all the way to our new president. That there’s no reason not to invest heavily to restart the economy, as Keynes himself put it: “No reason in the world, unless our hands are palsied and our wits dull.”
Published: 11/19/2008
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