The Economy: Does More Government Help or Hurt?

Stephanie Kelton, Ph.D.Chair, Department of Economics

University of Missouri, Kansas CityKC Public Library, Plaza Branch

September 16, 2014

Be Careful…..

For Example….

How to Help the Economy

Limit the size of government

Do anything else

Lucy Laffer Charlie Brownback

Unshackling the Spirit of Initiative

The poor won’t work because they have too much money and the rich won’t work because they have too little.”

~John Kenneth Galbraith

Let’s Do It, Art!

“If you build it, they will come.”

“We’ve had conversations with people and think it’s nice, but we haven’t seen any rush to hire new

people or build new facilities,” Robinett said. “There’s still the tendency to wait for the demand first. It’s unusual to take the approach to build up

the supply and expect the demand to come.”

~Tom Robinett, VP for Government AffairsOverland Park Chamber of Commerce

Is it Helping?

Better Question: Whom is it Helping?

• Growth in private sector jobs lags national average by a full percentage point

• KS is behind MO, OK and CO• Kansas Legislative Research

Dept. estimates total $4.5 billion decrease in revenue by 2018

• The bottom 20% are paying about $166 more in taxes, while the top 1% are paying $19,786 less

Capitalism is a system that only works when there are enough customers, spending enough money, to keep sales and profits growing

The Great Recession

Hemorrhaging jobs

How Government Helps A Countercyclical Shock Absorber

How Government Hurts• When the economy starts to

weaken, unemployment rises and the deficit increases

• The impulse is to fight against it (with austerity) to keep the deficit in check

• But that only makes things worse

• Like turning the wheel in the opposite direction in skid

• You have to turn into the skid to regain balance

Our “Economy” is Measured in Sales

Customer Killers

Plea for Austerity

FOREIGN

Private

Government

(Some of) Our Problems

Top 10%

Even a “Recovery” No Longer Improves the Majority

Not Enough Jobs, Given Demand

Workers Get Less & Less

What to Do?

• Federally-funded jobs program modeled on the WPA, CCC, NYA

• Infrastructure• Education (Pell example)• Student Debt• Research & Innovation

Thank You!

@StephanieKelton

Those are just some of things that government can do to help lay a foundation for long-term prosperity.