THE BLOG
07/08/2010 04:55 pm ET Updated May 25, 2011

The National Economy and a Lesson from Small City Leadership

In a July 7th, 2010 interview with Tom Ashbrook for NPR's On Point, Paul Krugman made some, perhaps, radical-sounding prescriptions for the national economy. According to a piece by John Wihbey for the show's site, the Nobel Prize-winning economist believes that

"The U.S. government should consider up to $1 trillion more in stimulus spending and should not seek to address deficit concerns until the unemployment rate returns to 'around 7 percent.'"

This is a bold proposal in these days of extreme belt tightening and fear over the national debt. Krugman's philosophy on spending appears to be shared by some both inside and outside the Democratic Party. In a February 1st article in The Hill, Rep. James Clyburn (D-S.C.) is quoted as saying:

"We're not going to save our way out of this recession...We've got to spend our way out of this recession, and I think most economists know that."

They appear to. Marty Feldstein, Harvard economist, conservative, and former economic advisor to President Regan contributes his support by saying;

"While good tax policy can contribute to ending the recession, the heavy lifting will have to be done by increased government spending,"

Still there are many including some in Krugman's own party- namely Blue Dog Democrats- who oppose any increase in spending. Says Krugman in response:

"I think the Blue Dogs, the conservative Democrats who are opposing this, are being really, really stupid even from a political point of view. They look at polls and say, 'Well, the public is worried about deficits.' Well, the public is actually worried about jobs'."

But this is not a theoretical debate to be played out in think tanks, polling firms, Ivy-League corridors, and swank federal offices. The real test of this 'spending to grow' philosophy comes when it is applied at a scale where citizens can see it at work- a scale which citizens personally know people who are getting newly created jobs and services- where they can see the benefits in their immediate surroundings. Hometown results are a far more convincing indicator of a policy's success or failure than color-coded maps and numbers on a data sheet.

Amesbury, MA is an example of a small environment in which strategic spending to grow an economy is a part of the battle-plan. The city's Mayor ,Thatcher Kezer III, a nearly 30-year veteran of the Air Force, has been in office for nearly seven years now, and he's seen his share of ups and downs in terms of budget, political will, and public support. While he has been criticized for spending, some of his proposals are actually budget-neutral, and many will strengthen the financial climate of Amesbury in general.

Still, because budgets everywhere are tight, Kezer has had to make major cuts as well, including laying off 10% of the city's workforce. In a city of between 16 and 17,000 residents, that is a fair number of jobs. Expressing sentiments any national politician could identify with, he says about such tough decisions, "Everybody agrees until you actually try to do it." Undeterred, his belief in the vision for bringing that number of jobs and more back to town allows him to proceed and progress. A realist, Kezer seems to understand that this economy calls for strategic cuts as well as expenditures even when painful.

Like many places, even though jobs are down, taxes are up. Similar to national complaints of overly burdensome tax rates, Amesbury is enduring repeated attacks on its tax policies. According to a piece for the local Newburyport Daily News, Amesbury taxes are the 5th highest in the state.

Kezer, like the President, is not unconscious of this. However, like President Obama's, his plans are bigger than the short-term relief of a slightly lower tax bill. "We're going to grow our way out of our tax situation," and for Amesbury, as well as the nation, that means creating conditions to attract more businesses- a type of strategic spending designed to add more jobs and businesses, thus spreading the tax burden over a larger share of people.

Differentiating it from its national counterparts, local government in general would appear to have the good will to make some of these leaps of faith. According to a Pew Research Poll for People in the Press 60% of those polled thought that local government had a positive effect on their lives ad compared to 34% who thought it had a negative impact. The Federal Government enjoys less good will, with only 23% of respondents "basically content" with the Federal government and 52% "frustrated."

This difference in popularity may have something to do with the relative approachability and smaller scale of local government. People seem to feel that they have greater control over local matters and stronger connection to local leaders. No doubt, this also has to do with the actions of Mayors like Kezer who are willing to stick to their guns when necessary and innovate when they see the advantages, not when political polls tell them to do so.

Too many national politicians are not willing to stray from party lines and tested "fixes" for national problems. These are times with few-to-no time-honored tests, making the time to innovate now. The moment to consider input from all sources, not just those with the same party mascot, or commensurate job title is here. Says Kezer of leadership on the battlefield,

"If you don't innovate and advance in the way you do business, you die."

Innovation in this economy requires capital, and perhaps this lesson from a small city mayor can help convince those in congress that it is time to start spending, before we lose the economic war.