Leftist Claims Government Spending Reduces Growth
Now Dean Baker argues that military spending will reduce economic growth, a theory which contradicts fellow leftist Paul Krugman's view that military spending during World War II is what took us out of the Depression. This is how Baker explains his theory:
"defense spending means that the government is pulling away resources from the uses determined by the market and instead using them to buy weapons and supplies and to pay for soldiers and other military personnel. In standard economic models, defense spending is a direct drain on the economy, reducing efficiency, slowing growth and costing jobs."
I have no objections to what he says here, but it is interesting that he fails to notice that this logic applies to all forms of government spending, not just the military. And yet Baker has been a consistent advocate of increased government spending in all other areas.