15 September 2010 
President Obama and New Jersey Governor Chris Christie are providing a phenomenal case study of the intersection between economics and political argument.
The President and Governor each make their case about how much government should spend on salaries of teachers and other government employees in a recession. The debate is fascinating because the traditional arguments are inverted. The Democrat is arguing growth, while the Republican is arguing equity.
First here’s the President on Monday in Fairfax, Virginia:
PRESIDENT OBAMA: Now, the challenge we have is, ironically, that if you start laying off a whole bunch of teachers, or a whole bunch of police officers or firefighters, now they don’t have a job, which means they spend less, which means that there’s less tax revenue. And you start getting into a vicious, downward spiral.
Now, here’s Governor Christie, speaking at a Town Hall meeting last week:
GOVERNOR CHRISTIE: Ask the people in the private sector in the state of New Jersey, when the last time was they got a raise. Yet the average teacher contracts, before I became Governor, had 4.9 percent annual increases, when we had zero or one percent inflation. Now that can’t be justified any longer.
I’ll label this the Christie Principle of Shared Sacrifice: At all times, and especially during a difficult economy, it is unfair for those who run government, and those who receive paychecks from government, to exempt themselves from the difficult financial decisions that other private citizens are required to make.
Usually Republicans argue growth/efficiency, and Democrats argue equity. It is surprising and refreshing to hear a Republican effectively make this case.
Gov. Christie uses another equity argument to explain why New Jersey teachers should be required to contribute toward the cost of their health insurance:
The federal government for federal employees pays 66 percent of the cost of the health benefits for their employees. The state of New York pays 83 percent of the health costs for their employees. In the state of New Jersey, overall for all employees across the board, we pay 92 percent of the costs of the health insurance for every one of our public employees. And, among teachers, the overwhelming majority of teachers in the state of New Jersey, pay nothing towards their health insurance premiums, for full family medical, dental, and vision coverage, and, for benefits that do not just continue during employment, but if they stay employed long enough, for benefits that continue for life.
President Obama is arguing growth to justify more government spending, and Governor Christie is arguing equity to justify less. The political debate about economic policy has inverted.
You can see Governor Christie’s entire answer here:
(photo credit: Bernard Pollack)
The debate is not inverted, because Obama is making an argument that only seems economic or reasonable.
Spending is not an end in itself. Obama (and Christina Romer, Obama's outgoing Chair of the White House Council of Economic Advisers) are pushing an economic analysis that is fundamentally, crazily backwards. We don't spend money to create jobs, we organize jobs to provide useful things. We should apply the least resources (money) that we can toward producing those useful things.
The result of spending is what is produced. That is it. The money is not fairy dust spreading wealth to whoever touches it. The money represents say a basket of groceries that is traded in exchange for producing those useful things.
At best, government spending buys absolutely necessary things such as military arms that only a government can control. At worst, government passes out money to friends and contributors, producing little of value to the general society, under the cover story of producing jobs.
Every dollar of government funds has been or will be taken from someone who has produced, or will be expected to produce something useful. He has worked hard for that dollar that the government takes away in taxes.
Romer and Obama are Theoretically Correct, but only in accord with a flawed theory and ridiculous analysis.
"then the wise course of action would be to make everyone government employees." Yes, thank you. I quickly came to that conclusion, too. I'm glad not to be the only one!