Paraphrasing George Orwell, some things are so foolish only an economist could believe them. Which quickly brings us to Lael Brainard, director of the Biden administration’s National Economic Council. Talking about U.S. funding for Ukraine’s war effort, Brainard told the Wall Street Journal’s Tom Fairless that “That’s one of the things that is misunderstood…how important that funding is for employment and production across the country.” Fairless is apparently sold. He writes that financial support for Ukraine “is good for the economy.” Memory says former George W. Bush adviser Karl Rove similarly suggested there's a stimulative quality to armaments building for Ukraine, as has the right-leaning editorial board of the New York Post. Which merely proves that non-economists can be just as easily gulled as economists.
About what Brainard, Fairless, Rove, and others believe, this is not a comment on the good or bad of U.S. support for Ukraine. Wise minds can disagree on the latter. What’s not debatable is whether or not U.S. spending on Ukraine is boosting economic growth. It isn’t. Never, ever, ever. Such a view vandalizes common sense, along with basic economics.
Up front, an economy is just people. And people are more productive the more that they’re able to divide up work with other people. In which case the killing of Ukrainians by Russians, and Russians by Ukrainians could in no way stimulate growth in the United States. What annihilates human capital annihilates the knowledge that powers growth along with the division of labor which is the instigator of the productivity without which there is no growth.
From there, consider how the spending for Ukraine employs Americans: in the creation of bombs, bullets, and other armaments most useful for destroying wealth and people. How Brainard et al could presume that the creation of that which exterminates people and wealth would boost economic growth is one of those questions that there’s no adequate answer to. Needless to say, if Brainard’s assertion were even remotely true, it would call for the U.S. to instigate costly wars that it would fund every time the U.S. economy stalls or recesses.
All of which brings us to government spending. About it, repeat it over and over again that governments have no resources. Their ability to spend is a consequence of their ability to tax wealth always and everywhere produced in the private sector. Which means that governments can only spend insofar as they extract wealth first from you, me and the man behind the tree. Think about that.
If we ignore that war is the opposite of economic growth for it extinguishing people and wealth and the work divided that drive wealth creation, we can’t ignore that government spending is a consequence of workers and savers having fewer dollars in their pockets. To pretend otherwise is to pretend that we the people can lift the proverbial $20 bill from the pocket of our neighbor without the neighbor winding up $20 poorer. If you view Brainard’s thinking as a bit fabulist, you’re not wrong.
After which, it should be added that the rich pay the vast majority of taxes. This is important simply because the rich uniquely have the savings that, if not taxed away by politicians, are matched with talent on the way to greater economic growth. Fhe financing of war is not only a tax on growth, but in reality a double tax of growth as wealth extracted from the private sector funds maiming, killing, and wealth destruction.
It's all a long way of saying yet again that regardless of your views on Ukraine, please don’t shrink yourself by saying that our funding of the country’s war effort is having a salutary impact on U.S. growth. It’s not. How horrifying to think that economists think otherwise.
