It should come as no surprise that the very first move of the new Republican Senate is an attempt to push US president Barack Obama into approving the Keystone XL pipeline, which would carry oil from Canadian tar sands. After all, debts must be paid and the oil and gas industry – which gave 87 per cent of its 2014 campaign contributions to the GOP – expects to be rewarded for its support.
But why is this environmentally troubling project an urgent priority in a time of plunging world oil prices? Well, the party line, from people such as Mitch McConnell, the new Senate majority leader, is that it’s all about jobs. And it’s true: building Keystone XL could slightly increase US employment. In fact, it might replace almost 5 per cent of the jobs the US has lost because of destructive cuts in federal spending, which were the direct result of Republican blackmail over the debt ceiling.
Oh, and don’t tell me that the cases are completely different. You can’t consistently claim that pipeline spending creates jobs while government spending doesn’t.
Let’s back up for a minute and discuss economic principles.
For more than seven years – ever since the Bush-era housing and debt bubbles burst – the US economy has suffered from inadequate demand. Total spending just hasn’t been enough to fully employ the nation’s resources.
In such an environment, anything that increases spending creates jobs. And if private spending is depressed, a temporary rise in public spending can and should take its place. That’s why a great majority of economists believe the Obama stimulus reduced the unemployment rate compared with what it would have been without that stimulus.
From the beginning, however, Republican leaders have held the opposite view, insisting we should slash public spending in the face of high unemployment.
And they got their way: the years after 2010, when Republicans took control of the House, were marked by an unprecedented decline in real government spending per capita, which levelled off only in 2014.
Fiscal austerity
The evidence overwhelmingly indicates that this kind of fiscal austerity in a depressed economy is destructive; if the economic news has been better lately, it's probably in part because of the fact that federal, state and local governments have finally stopped cutting. And spending cuts have, in particular, cost a lot of jobs. When the congressional budget office was asked how many jobs would be lost because of the sequester – the big cuts in federal spending that Republicans extracted in 2011 by threatening to push the US into default – its best estimate was 900,000. And that's only part of the total loss.
Needless to say, the guilty parties here will never admit they were wrong. But if you look at their behaviour closely you see clear signs that they don’t really believe in their own doctrine.
Consider, for example, the case of military spending. When it comes to possible cuts in defence contracts, politicians who loudly proclaim that every dollar the government spends comes at the expense of the private sector suddenly begin talking about all the jobs that will be destroyed. They even begin talking about the multiplier effect, as reduced spending by defence workers leads to job losses in other industries. This is the phenomenon former representative Barney Frank dubbed "weaponised Keynesianism."
And the argument being made for Keystone XL is very similar; call it “carbonised Keynesianism”. Yes, approving the pipeline would mobilise some money that would otherwise have sat idle, and in so doing create some jobs – 42,000 during the construction phase, according to the most widely cited estimate. (Once completed, the pipeline would employ only a few dozen workers.) But government spending on roads, bridges and schools would do the same thing.
Crumbling infrastructure
And the job gains from the pipeline would, as I said, be only a tiny fraction – less than 5 per cent – of the job losses from sequestration, which in turn are only part of the damage done by spending cuts in general. If McConnell and company really believe that we need more spending to create jobs, why not support a push to upgrade the US’s crumbling infrastructure?
So what should be done about Keystone XL? If you believe that it would be environmentally damaging – which I do – then you should be against it, and you should ignore the claims about job creation.
The numbers being thrown around are tiny compared with the country's overall workforce. And in any case, the jobs argument for the pipeline is basically a sick joke coming from people who have done all they can to destroy American jobs – and are now employing the very arguments they used to ridicule government job programmes to justify a big giveaway to their friends in the fossil fuel industry. – (New York Times service)
