A Bold Defense of Sin City Stimulus

The notorious Amity Shlaes, the Bloomberg scribe  who drives liberals around the bend with her thinly sourced argument that the New Deal was a failure, has come out boldly in favor of at least one form government stimulus spending. In a jaunty column today, “Sin City on the Potomac Wounds Nevada’s Bordellos,” Shlaes faults President Obama for driving business from that engine of American economic recovery, the capital of casino gambling.

No, its not parody. Shlaes, who can be fairly classified as a libertarian neocon, is having fun tweaking the pieties of the liberal left and Christian right in the service of Las Vegas business interests who are complaining to Politico and any one else who will listen that Obama’s let’s-get-to-work exhortations prompted TARP-subsidized Goldman Sachs to cancel a scheduled convention in Sin City. As a quipster, Shlaes is amusing. As an economist, her ideas are half-baked, as this contorted passage reveals.

Government pork tends to produce junk gross domestic product, because even really smart government doesn’t allocate capital optimally. To dismiss what GDP Nevada generates as junkier than what Washington might generate is misguided, since Nevadans most of the time probably know better what investments make sense.

Her complaint that the president effectively discouraged the recipients of TARP money from scheduling Nevada getaways implies that taxpayer money spent in Sin City is as productive as money spent anywhere else, so why be a stick in the mud? Shlaes isn’t exactly contending that spending taxpayer money in Nevada whorehouse is as worthy a way as any to drive economic recovery (though her headline implies as much), but she is saying you’d have to be liberal to think its smarter to spend taxpayer money on solar power than on gambling junkets. At least she’s right about that.