Some answers for Martha...

In this post, Martha C asked some good questions about the economy and how to explain her conservative viewpoints to liberals. Fiscal conservatives and liberals have vastly different points of view, which can make conversations between liberals and conservatives extremely difficult. Adding to the confusion is the fact that liberals and conservatives can say the same words and mean entirely different things.

I am not an economist. I am just a lowly graduate assistant in the computer science department at my university. Still, I think I can address at least a couple of Martha's points.

Most liberals are motivated by a pretty fundamental hatred of/disrespect for "big business" (even little business) -- they mostly grew up being taught that owners of businesses are cold, uncaring, selfish people who are out to rip off as many people as they can, etc. I wonder whether Palin or Scott Brown or others could talk about the fact that there ARE a lot of selfish, greedy, dishonest people in business; and that many of them have hurt others on their way to success. Then they could go on to say, BUT it's also a fact that the success of these people DOES create jobs for others and creates wealth in the community, which in turn provides a bigger tax base, etc. Maybe it could help, too, to throw this in: Every NFL, NBA, NHL, and MLB fan can think of some hot shot player that is totally obnoxious and is earning an obscene amount of money. But they realize that the player brings crowds, wins games, etc., which creates jobs and other good stuff in the community, so they don't talk about trying to get rid of that player (unless the bad behavior is totally extreme). I think this is an honest approach that could work with people. They might even buy the idea that there are just as many fat-cat, dishonest crooks in government as there are in the private sector.

Martha mentions "greed". This is a word that gets casually tossed around a lot in political debates. In an interview with Phil Donahue, Milton Friedman describes greed as "individuals pursuing their separate interests". He also points out that this "greed" is not unique to countries like the U.S., which have capitalist economies. Every nation's economy is based on greed -- it's just a matter of whose greed. At some point, greed became a dirty word. However, greed is what makes our economy work. In order to acquire more money to satisfy my greed, I must serve other people by producing some good or service that somebody else wants.

I also want to address Martha's discussion of "obscene" salaries. I think that Martha was mostly using this word in a tongue-in-cheek way, but there are many people who rail against the "obscene" profits of the insurance industry and other "fat cats" in "big business". (A quick Google search for "obscene profits" will give you some good quotes.)

The use of the phrase "obscene profits" reveals a lot about the underlying attitudes of the speaker. Consider Martha's example of the "obscene" salaries earned by professional athletes. A person who describes athletes' salaries as "obscene" is implicitly saying that he disagrees with the spending habits of millions of fans. Whether you are railing against the "obscene" profits of professional athletes or the "obscene" bonuses of company executives, this is an extremely arrogant attitude. Then again, big government is all about arrogant paternalism.

The whole other side to this that isn't explained well enough (for those of us without economics backgrounds) is WHY government spending on infrastructure projects isn't as helpful to the economy as the same about of money would be in the form of tax cuts.

First of all, infrastructure is necessary for a strong economy. You must be able to get goods from point A to point B. However, I think Martha is referring to the makework projects in the Democrats' "stimulus package". This bill was passed, based on the economic fallacy that spending a bunch of money will produce additional wealth. Politicians with this view would argue that these projects will inject money into the economy, which will be spent, and re-spent, and re-spent....

Anyone who looks at this more closely can see that this makes no sense. This is just a case of politicians (and the people who voted for them) falling for the Broken Window Fallacy. Economist Frederic Bastiat describes a vandal, who throws a brick through the window of a shop. A crowd forms, and instead of becoming angry at the vandal, people in the crowd suggest that the vandal has done a great service. The broken window has provided a job for the glazier, who produces windows. The glazier will use his profits to buy bread from the baker, and so on. However, the people in the crowd have ignored an obvious question: how would the shopkeeper have spent his money if he did not have to buy a new window? He might have used his extra income to buy a new suit from the tailor. After spending money on a window, the shopkeeper cannot afford a new suit, so the tailor is out of a job. In actuality, the vandal did not create any jobs or wealth. The entire economy is poorer by the amount of one window.

In the same way, the "stimulus package" creates jobs in the construction industry, which politicians are all too happy to take credit for. On the other hand, taxation stifles the creation of new jobs in the private sector. This results in highly visible beneficiaries of new construction jobs and invisible victims, who would have been hired had this bill not been passed. Therefore, politicians can take all the credit and receive none of the blame, which is just how they like it.