Another one of those ideas that floats around is that “government should tighten its belt like any family would do.” This doesn’t sound right to me either. What, exactly, happens when belt-tightening becomes widespread?

  • Let’s posit that I lose my job at the lumber company — not such a farfetched idea, since I did lose my job. Quite sensibly, I cut back on the amount of goods and services that I purchase. For example, I don’t buy a new car that I’d planned on getting.
  • The car salesmen doesn’t get his commission, so he postpones adding a bedroom to his house.
  • The home improvement company, faced with a drop-off in business, doesn’t buy as much lumber as it might otherwise have.
  • The lumber company lays off another worker.
  • That newly unemployed worker decides not to buy a car.
  • Repeat several million times.

I’m not arguing that individuals should go into debt for the sake of keeping others employed; but I think that, as I said in Part 1, it’s the government’s job to intervene with some sort of stimulus.

I think that throwing money out the window is inefficient (although it has some free-marketesque appeal, if you like that kind of thing). What I would like to see are things that directly put money in the hands of the unemployed while paying direct benefits to society: things like the WPA, CCC, and the like.