In a recent post, Steve Conover wrote:
... the false premise [is] that everything the government buys must be paid for right now with tax receipts or spending cuts, or else we shouldn't do it.Everything the government buys incurs a cost right now. Every new program is paid for now by foregoing other potential consumption and/or investment. Either it's paid for by foregoing other specific government programs, or it is paid for by consuming or investing less in unforeseeable ways in the private sector. Just because you can't identify exactly what consumption and/or exactly which investments don't happen does not mean you're not redirecting current resources. It also doesn't much matter if taxes or borrowing are used to suck resources from the private sector into the government.
What I'm pointing out is the distinction between the financing of spending and the spending itself. I absolutely agree that financing by borrowing is perfectly okay, especially when in the range of just a few percent of GDP. However, the cost is immediate at the point of spending. Resources (labor, tangible capital assets, etc.) are now deployed because of the spending. When the government spends money, those resources are no longer available for other productive purposes.
Again, the financing method chosen in order to deploy the resources is immaterial. But when scarce resources like labor are deployed somewhere, they cannot also be deployed somewhere else. That is an immediate and unavoidable cost which we have no choice but to "pay" as we "go".There are possible exceptions. If unemployment is quite high, then labor intensive programs don't necessarily have much of a cost since those resources were not deployed anyway. However, I believe that 4.7% is low enough such that incremental government spending on labor will transfer resource from the private sector to the government. The lower the unemployment, the closer to unity this effect will be.
I have no problem with the government spending money. But let's not pretend that there's no cost just because we use borrowing as the method of financing that spending. There is cost, and it's incurred at the point of spending (deploying the resources), unless those resource would not have been otherwise deployed.No matter what, when the government spends money, you pay for it.